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Baroness Hollis of Heigham moved Amendment No. 153A:

Page 8, line 21, at end insert ("and
(c) to enable property adjustment orders to make provision as to pension benefits").

The noble Baroness said: In moving Amendment No. 153A I shall speak to the substantive Amendment No. 203C and to the consequential Amendment No. 212AC, which stands in my name and the names of the noble Baronesses, Lady Seear and Lady O'Cathain, and the noble and learned Lord, Lord Simon of Glaisdale.

I do not propose to describe the amendments in detail. If the Committee agrees, I shall instead try to argue the issue in the hope that the amendments will attract the support of the entire Committee. When we discussed the Pensions Bill last spring we tried to make more equitable the financial provisions of divorce. Now we are dealing with a family law and divorce Bill in which we are trying to make more equitable the financial provisions of pension.

Why do we need to revisit the issue? Last spring there was wide agreement in the House, when we discussed pensions, that they were part of matrimonial property. The husband may have earned it--let us assume for these purposes that he is the pension holder--but the wife, in bringing up the children, supporting the husband and taking a range of part-time jobs to add to the family budget, has contributed her share too. Until last spring, however, even though a pension might be the largest financial asset in the marriage, she was entitled to none of it.

Clearly, when you are trying to settle financial matters at the time of divorce, if you ring-fence as untouchable the largest single asset then possible injustice follows. And it did. Countless women wrote to your Lordships--especially to the noble Baroness, Lady Young--describing the destitution into which they had been plunged.

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In the Pensions Bill, your Lordships decided two things. First, that courts must take pensions into account on divorce and, secondly, that they could do this either by offsetting it with other assets, if there were enough of them, or by earmarking, that is deferred maintenance, splitting the flow of pension income when it comes to be drawn at retirement. I am sure we would all like to pay tribute here to the noble Baroness, Lady Young, who fought so stoutly for an amendment that attracted the entire support of the House

Noble Lords: Hear, hear!

Baroness Hollis of Heigham: It was also agreed at that time that earmarking or deferred maintenance should be paid through the pension fund, rather than separately by the husband, to avoid pensioners having to pursue the issue through the courts.

These were good and valuable changes made by the whole House which were especially helpful to older women--women in their late 50s--who have too often written to us to say that they have been traded in for a younger model.

But deferred maintenance or earmarking has, as we now know, two great drawbacks. The first is that the wife's pension maintenance depends on the husband. It is a gamble. If he retires early she has less income; if he retires later she has to wait longer for it; if he dies early, she may get nothing; and when eventually after retirement he does die, she will get nothing.

Let us say that he is three years older than she. He dies at 80 and, unfortunately, she dies at 85. For 15 years after reaching pension age she will have had an adequate pension. Then, when she is 77, he dies. For the last eight years of her life her pension have vanished, because he has gone, and she will be forced onto income support at a time when she is increasingly frail, needs more home help, extra heating and perhaps more nursing. A frail, elderly lady is forced into penury, through no fault of her own, because deferred maintenance--though suitable for many couples--is a lottery on his life. That is no way to live.

The second difficulty with deferred maintenance is precisely that: it is deferred until retirement. A couple may divorce in their 40s, and that means that for the next 40 years their financial lives remain entangled, even though it may have been clean and decent for both of them to have had the opportunity of a clean break. With deferred maintenance they cannot do so. They have to keep track of each other and the pension scheme has to keep track of them both.

May I urge a third option which does not just offset assets against each other, if you are rich enough, and not just defer maintenance, which splits income at retirement if you are elderly enough. We need the third option of pension splitting, that is splitting the capital at the point of divorce, so that each party has the core of a pension on which to build while they continue in work, keeping both of them off poverty in old age and allowing both of them to get on with the rest of their lives. It is clean, it is decent, it is simple and it is fair. It is supported by every organisation that I am aware of which has an interest; by the entire pensions industry,

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by accountants and actuaries and professional associations, by business and industry led by the CBI, by the law societies and family solicitors societies, by organisations representing the elderly, such as Age Concern, and organisations representing women, from business and professional women's organisations to Fair Shares and the Mothers' Union itself. If then it is fair, and if it is, as I have suggested, so widely supported, why did the Government then resist splitting pensions? The Government gave, basically, two financial arguments. But those arguments no longer apply, as the Government concede.

The first argument was that it would cost the Government, as employer, £500 million a year if the departing spouse took her share of the pension out of an unfunded Civil Service scheme. The way to deal with that real problem is that in any unfunded scheme-- the Civil Service scheme, for example--both fractions of the pension remain within that scheme and are not taken out until, or if, the pension earner transfers out or retires. That way there is no real cash outflow and, therefore, there is no cost to government as employer. The problem goes away. In good schemes--as the Civil Service scheme is known to be--most people would wish to keep their pensions there. Such a small restriction on Civil Service and unfunded schemes is a small price to pay for broad justice for the rest of our working people who are in occupational and private schemes. That was the first of the Government's argument, and we can show a way of addressing it which produces no cost to government as employer.

The Government's second argument was the cost to the Government as tax raiser. The Government, in this House, argued that tax allowances and fiscal drift would in 2037 cost £300 million. By the time it went to the House of Commons, the Treasury figures had become £200 million a year. Now the Treasury has conceded, in its Written Answers to myself on the 9th and 15th January, and in the House of Commons on 15th January, that in the year 2020--25 years from now--the cost to the Treasury in loss of tax will be £80 million, offset, says the Treasury, by savings of £70 million in income support, together with something in the region of £10 million in court costs and legal aid. In other words, costs of £80 million, savings of £80 million, cost to the taxpayer nil. Those are not my figures but Treasury figures, and I apologise if they are very different from the Treasury figure of £300 million which was bandied around last spring. The Treasury, on its own information, now accepts that the true cost to public funds is nil.

Last spring we did not, as some of us would have liked to do, press this amendment to a vote because we respected Treasury information that has subsequently turned out to be--how can I put it?--less than complete. However, the noble and learned Lord, Lord Mackay of Clashfern, and the noble Lord, Lord Mackay of Ardbrecknish, did say at the time that we would have a second occasion on which to revisit this issue--that is to say, this Bill--and my faith in them, if not in the Treasury figures, remains unshaken.

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I would expect pension splitting to produce some technical difficulties with SERPS and GMPs, but we have drafted amendments which could possibly overcome such difficulties. No one ever said that pensions would be easy. It is technically difficult--we all accept that--and we accept that any amendments we have drafted may be flawed. However, we have overcome the two major arguments that the Government used to stop us going down that route last spring. We now know that the remaining arguments are lesser and technical. They can and should be overcome and they can and would be overcome if the political will was there. If the department were asked to resolve those difficulties it would do so. I hope that that is what Members of the Committee will say today.

The amendments are not party political; indeed, I believe that there is widespread support for them in the Committee. Certainly, Members of all parties in this Chamber have expressed their support. They do not favour women over men or men over women. The provision would apply equally to both. Many men would prefer to keep some present assets--savings--and part of their pension rather than lose all their present assets to keep a pension which they may never live to enjoy. Moreover, the provision would not privilege divorce over marriage. That is an argument to which I shall return if necessary. Instead, it would stretch a pension that normally covers one household to cover two, thus saving us all money on benefits in the process.

We are talking about a set of amendments which are fair, decent, clean and simple. Indeed, it represents what couples and the courts want as an option; it is what every professional organisation wants; and, on the Treasury's own figures, it need cost taxpayers nothing at all. I truly believe that Amendment No. 153A is a win-win amendment. We do not always have the chance to do what is right, fair, popular and free. We can do so today. In so doing, we will float thousands of elderly people off the poverty line in old age. I beg to move.

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