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Baroness Hollis of Heigham: It gives me great pleasure to follow the clear and eloquent speech of the noble Baroness, Lady Young, in moving Amendment No. 166. I wish to speak to that amendment and to Amendment No. 182A which stands in my name. They present different approaches but achieve the same objective. I hope that the Minister will not say that he does not have an abundance of choice as regards the routes to follow.
Few women have the chance to build up a decent occupational pension of their own. During their lifetime they earn less, and often their working life is properly interrupted by having children and caring for them or by caring for elderly relatives. That is the result of a family decision taken by husband and wife together. Wives may move home several times in order to support their husbands' occupations, and each time give up a job in order to keep their families together.
Yet after a marriage of perhaps 30 or 35 years some women face divorce and possible penury in old age. I was told of a woman who had looked after her children until they were grown up. She trained to be a teacher, took a job as such and then developed multiple sclerosis. Two years after developing the disease, her husband divorced her. She was most surprised, shocked and upset. She faces an old age without pension rights. As she has no access to her husband's pension she will almost certainly have to sell the bungalow that was specially adapted for her needs.
As was said by the noble Baroness, Lady Young, one-third of marriages end in divorce with the pension being the largest single financial asset in the marriage. It is no longer enough to keep those in separate compartments. As was clear from the response to the noble Baroness's speech, all Members of the Committee recognise that the present situation is unfair and unjust. I am sure that we should all like to find a decent and fair solution for all parties in such a situation.
I am sure too that the Government will say that it is all very difficult. I do not believe that it is. The Government may well seek to persuade the Committee that while they are hugely sympathetic to the problemand I do not doubt that the Minister isand that they are anxious to do all that is possible, the time is not right and further research is needed.
They have just commissioned further research and they may say that we should wait to see what the problem is. Seven pieces of research have already told us what the problem is. Many pieces of research, including the latest PMI report, tell us precisely what we might do.
I fear that the Government might seek to prevaricate and delay. I hope that the message from the Committee today will be, "We don't do that". We have a major Pensions Bill and we cannot expect another such Bill in the foreseeable future. Nor can we expect a Matrimonial Causes Bill in the immediate or foreseeable future. This is the right Bill at the right time backed by the right research and it is right for us to say clearly to the Minister that this is an issue that we can tackle today in ways that are fair, just, equitable and straightforward to all parties.
Why is there a problem? The noble Baroness, Lady Young, rightly told the Committee that under trust law, on the one hand, and the special tax privileges given by the Inland Revenue, on the other, occupational pensions cannot be split or assigned to anyone else. That is sensible; it is a protection against, say, a creditor. However, it means that an occupational pension cannot be split or assigned to a spouse, even though it may be the family's largest single financial asset.
In tabling the amendments today, we are asking that the courts shall have a duty to take pension assets into account as part of the financial settlement on divorce and that the courts shall have the power to divide them, override any trustees to that effect and without jeopardising Inland Revenue status. The way in which they are apportioned will be determined by the courts at the point of divorce and in the light of the family circumstances. We are providing a duty on the courts to take them into account and a power on the courts as to how they do so.
The PMI report outlines three basic ways in which the courts might take those assets into account. The first is offsetting; the second is earmarking; and the third is splitting. We favour the third suggestion; but perhaps I may enlarge on all three. The first way of taking a pension asset into account is by offsetting. The courts can do that now; that is, they can offset against the pension, which must remain with the scheme member (who is usually the husband) other assets such as savings or the matrimonial home. The courts can do that now; and very often, all too often, it does not work. Why is that? As the noble Baroness, Lady Young, said, there are insufficient offsetting assets and the pension is worth very much more than the rest of the assets put together so that the wife is short-changed.
Alternatively, even where both the material and pension assets balance each other out, immediate assets are being set against long-term assets. Therefore, in order to keep a pension which he may never live to enjoy, the husband is stripped of his short-term assets such as the matrimonial home and savings. Neither party would wish that to be the way forward. Therefore, offsetting does not work although it could continue if there are sufficient assets and that is what both parties want. We have that already but it does not work.
The second route is to earmark so that the pension is divided at the point of retirement. That is uncertain unless one is receiving a pension at the time at which the divorce occurs. What happens when the scheme member changes jobs? Does he carry the earmarking with him to four, five or six different jobs, with the employer having to make a record of that? What happens if the scheme member dies before he is 65 and the scheme deeds allow a widow but not somebody who is divorced to be a beneficiary? What happens if there are two or three spouses each with a charge on a pension but not knowing what they will receive or when, so that they have to wait until the age of 65 to know what are their future prospects?
Earmarking merely delays to the point of retirement the financial settlement which should have been made properly at the point of divorce. What most people would like is a clean break so that they can get on sanely and sensibly with the rest of their lives rather than continuing an on-going financial relationship for 20, 30 or 40 years after the marriage has ended.
We have offsetting now and it does not work. Earmarking is messy and chancy and leaves all parties insecure. Therefore, what is the right way forward? As the noble Baroness, Lady Young said, it is to divide pension rights at the point of divorce. That is what the PMI, the Law Society, Goode, Fair Shares and the EOC call for, and I believe that that is what voices call for on all sides of this Committee.
On divorce, the cash value of the pension so far accrued would be calculated precisely as it is now, often several times during a working life, when a scheme member changes jobs and wants his pension rights transferred with him. In other words, in relation to divorce we should be using the well-established procedure which is easily and continually used by scheme professionals and members every time a scheme member changes jobs. It is not difficult. It is easy and straightforward. It follows well-established actuarial principles. At present the cash value of a pension is calculated for transfer. It can be calculated in exactly the same way to divide it. What could be simpler than that? It is already done several times during a scheme member's working life. We say that that straightforward principle should be applied to the unfortunate situation of a divorce.
If that were done, much of the bitterness over financial arrangements on divorce would be avoided. Both parties could get on with the rest of their lives. It would not be retrospective. We have learnt that lesson in relation to the CSA. It would bring English law broadly into line with that of Scotland. It would apply to men and women alike. It would be clean, decent, fair, simple and straightforward, and we could do that now.
If the Committee were minded to support the amendment, the Bill would lay down the principles requiring the courts to take pensions into account and to divide them as appropriate at the time of divorce. Justice would be done to men who would be able to retain more of their current cash assets. Justice would be done to women who would have some financial security in their old age.
This is a major Bill in which we are seeking to deliver a pension promise to scheme members to protect them against insolvency and fraud. If Members of the Committee will it, we can do something else; namely, share that pension promise fairly and decently between husband and wife at the point of divorce. We do not need to delay, defer or prevaricate. We do not need further research. We can just do it. Let us do it because I am sure that every one of us believes that it is the right thing to do.
Baroness Seear: Although the amendment is not in my name, I can confirm the expectations of the noble Baroness, Lady Young, that the amendment receives wholehearted support from these Benches. Again and again we have seen cases of women who have supported their husbands, perhaps for 20, 30 or 40 years, while they are building their careers and who are then divorced at the stage at which they are beginning to need financial support in the form of a pension. There is no need to go into a great deal of detail. It is common justice that the woman should receive an appropriate share of that pension because of the contribution that she has made during her married life.
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