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Baroness Hamwee: My Lords, will the noble Lord accept that I shall spare the House the detail of the problems to which I alluded in my supplementary question, but that I shall accept with alacrity his offer to review the position further for next year? I shall pursue that with him, if I may.

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South Africa Bill [H.L.]

Read a third time, and passed, and sent to the Commons.

Pensions Bill [H.L.]

3.7 p.m.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Mackay of Ardbrecknish.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 83 [Inalienability of occupational pension]:

Lord Lucas moved Amendment No. 164:


Page 47, line 7, leave out ("no agreement can effect any of those things") and insert ("an agreement to effect any of those things is unenforceable").

The noble Lord said: This amendment is designed to make the meaning of the subsection clearer. Its purpose is to clarify that any agreement to assign, commute, surrender or have a charge, lien on or set off exercised in respect of an entitlement or an accrued right under an occupational pension scheme is contrary to this subsection and is legally unenforceable. The amendment gives further clarification to our intention that all occupational pension rights should be inalienable. I beg to move.

On Question, amendment agreed to.

Baroness Seear moved Amendment No. 165:


Page 47, line 37, leave out ("negligent").

The noble Baroness said: This amendment is intended to make the job of the trustees less of a risk than at present. We are anxious that people should act as trustees and it is important that they should not feel that they are putting themselves at considerable personal risk in doing so. The amendment deals with the provisions whereby there can be a charge resulting from a


    "criminal, negligent or fraudulent act".

We agree that such provisions should apply to criminal or fraudulent acts, but the word "negligent" can be widely interpreted. It would be easy for someone, with the best will in the world and acting as competently as he was capable, to take some action which might subsequently be described as "negligent". We do not want to frighten people away from taking on such work. I beg to move.

Baroness Turner of Camden: This amendment has our full support. The word "negligent" is very wide and could mean that somebody could stumble accidentally into a situation where penalties would become applicable. That does not seem right.

Lord Mackay of Ardbrecknish: Similar provisions concerning the right of an employer to exercise a charge or lien on, or a set off, against a person's accrued right

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or entitlement to a preserved pension have been in force for some time. The existing provisions enable an employer to recover a monetary loss arising out of a criminal, negligent or fraudulent act or omission. The PLRC considered that those provisions were generally satisfactory and recommended that they be extended to cover all pension entitlements, and that is what Clause 83 does.

The amendment seeks to limit employers' rights to recover monetary losses. An employer would no longer be able to recover losses arising out of a negligent act or omission. We do not consider that such a restriction is necessary. Perhaps I may reassure the noble Baronesses that these provisions will not permit an employer to act in a totally unrestricted manner. We have put in place restrictions which will limit the recovery to either the amount of the loss or the value of the member's actual or prospective benefits, whichever is less. In addition, where there is a dispute, the employer's rights will not be enforceable without a court order or an award of an arbitrator. In the light of those reassurances, I hope that the noble Baroness will be able to withdraw the amendment.

Baroness Seear: I should like to consider what the Minister said before the next stage. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Young moved Amendment No. 166:


Page 47, line 37, at end insert:
("(e) a surrender or assignment of part of the person in question's benefits in connection with matrimonial proceedings in prescribed circumstances.").

The noble Baroness said: I shall speak also to Amendment No. 192. I recognise that the issue I am raising—occupational pensions in divorce—is outside the original scope of the Pensions Bill as presented to this place. The reason I raise it is the one I gave on Second Reading. This is a subject which was first drawn to my attention at least eight years ago. I have put down a parliamentary Question on it. I have been in correspondence on this matter with interested groups ever since. I have said to them all that I believe the point is important; that I hope to put right an injustice; and that I would raise it when a suitable opportunity arose. I believe that that opportunity is now before us with the Pensions Bill.

I believe that the amendment has great support from all parts of the Committee. I know that we shall hear from the noble Baroness, Lady Hollis, but I believe the same is felt by the Liberal Benches and the Cross Benches. It has great support outside this place. The matter was first drawn to my attention by the Diplomatic Service Spouses' Association, and by an organisation called Fair Shares. Judging from the number of letters on the subject that I have received, the interest and concern continue.

I spoke on this issue at length on Second Reading. I do not wish to go over all the arguments again. There are two facts as a backdrop to the amendments. The first, of course, is the greatly increased number of divorces. In 1991 there were 171,000 and, regrettably, I am sure that that number is considerably higher now.

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The second is the increased number of women living longer. There is also the particular concern of those women who are unable to earn for themselves their own occupational pension in their own right. I think especially of wives of those men serving in the Foreign Office who accompany their husbands abroad and who therefore cannot pursue a career in their own right; wives of members of the Armed Services, of the British Council; and many others whose husbands work abroad and who therefore are unable to pursue a career for themselves.

What all that shows is that times are now very different from when occupational pension schemes were first established. There is now great urgency about making amends and justice. This is not an easy issue to resolve because, if it had been, someone would have resolved it before now. The first question to be raised is: does the partner have the right to part of an occupational pension scheme on divorce? The answer to that is clearly yes, because of the changed circumstances which I have just described. There can be little doubt that a pension may be the largest financial asset a couple may have at the time of a divorce, particularly if they do not happen to own the house in which they are living.

So let us look at the situation. As I understand it, in Scotland the law on divorce is entirely different from that in England and Wales. It is covered by the Family Law (Scotland) Act 1985. That states that the matrimonial property must be taken into account in the divorce settlement. Another section in the Scottish Act states specifically that matrimonial property includes pension and life assurance arrangements. The law in England and Wales is covered by the Matrimonial Causes Act 1973, and in particular Section 25(2), which states that the court shall in particular have regard to the matters set out.

Then paragraph (g) states:


    "In the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring",

and so forth. Thus we can see from Section 25(2) (g) that the pension can be taken into account, but it is not always taken into account. I understand that there has been a great deal of debate about the term "will lose". I can see that being a fruitful source of debate for lawyers and others.

What difficulties arise from the law as it stands at present? The principal difficulty is that the courts have no right to split a pension, as under pensions law it is inalienable. Hence the husband tends to keep the pension and the wife frequently receives the house. That is not an entirely satisfactory state of affairs. It is not satisfactory for three reasons, one of which I have already mentioned: if the couple have been living in rented accommodation, there may be no free assets to split, and as the pension itself is inalienable it means that the wife will receive no benefit under the separation arrangements.

Then, the pension has been built up in a tax-free environment, and, if other assets are given to compensate for pension they are not receiving, the same

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tax-free advantages that the pension has had and the pension scheme assets can be sold at the current time and transferred, whereas the pension cannot be sold.

A number of people, including the organisation to which I referred on Second Reading (the Pensions Management Institute), have looked at the matter. As I said on Second Reading, they quoted at least five occasions in the past 20 years when the matter has been looked at and upon which a report has been made. The Pensions Management Institute set up a working party which comprised members of the Family Law Bar Association, the Equal Opportunities Commission, the Solicitors' Family Law Association, the Association of Pension Lawyers, and the Law Society. They recommended that the pension on divorce should be valued by:


    "The leaving service or transfer method".

That method is well known to people in the profession, and, as I understand it, does not cause any dispute. It was agreed that the pension should be split so that the wife should have the option of leaving it in the pension scheme, if she wished, transferring it to her own pension arrangements, or transferring it to a personal pension or a Section 32 annuity. If the pension were in payment, it should be earmarked in a way not dissimilar to the current position relating to salary or earnings after a divorce takes place. At the same time, the husband's pension in the pension scheme should be reduced by the corresponding amount. It would be equally true that if on divorce the wife were the earner the same arrangements should apply to her. I regard that as only fair.

The Pensions Management Institute put forward its proposals almost at the same time as the Government published the Pensions Bill. It is a great pity that the Government have not included the proposals in the Bill and have said that they are setting up another committee to look further into the matter. I am at a loss to understand what new information the committee can find. Five committees have already investigated the position and it is unfortunate that yet another will report in September after this Bill has become law.

My amendments attempt to deal with this urgent and worrying situation. It is causing some people, who never expected it, to live almost in penury. None of us wishes to see that. I hope that I have said enough on the matter today. I hope that the Minister will reflect on that and on what I am sure other Members of the Committee will say and that if he believes that the amendments are not correct he will come back at a later stage with amendments of his own. However, I should be satisfied if amendments were tabled in another place because it is important that the situation is dealt with.

The proposals meet the case for justice and it is difficult to see what additional information is needed. Above all, I do not believe that extra public expenditure will be created. There will be some loss to the Inland Revenue, but that will be more than compensated for by savings in the social security allowances currently paid to divorced wives. I regret that I do not have any figures to substantiate that statement, but I believe that if the amendment is put into effect there will be some offsetting savings.

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Amendment No. 192 is an enabling amendment. If it is necessary to wait until a further report is available it will be possible to introduce the provisions at a later stage. That is not the measure that I prefer. The Scottish situation is an improvement but does not go far enough. We require an amendment that covers all the situations that I have described. What we really want is an amendment made to the Bill in this Chamber.

I assure the Minister that I speak on behalf of many people who are currently suffering, and many people who, I regret to say, will suffer in the future if the matter is not put right. I am certain that in moving the amendment today I have support from all sides of the Committee. I beg to move.


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