Pension Rights on Divorce (Hansard, 16 June 1988)

§ The Lord Chancellor (Lord Mackay of Clashfern)
My Lords, the responses received by the Government to the consultation paper on occupational pension rights on divorce raised a number of problems concerning the proposed scheme. The Government are considering the matter further in the light of these responses and of the changes effected by the Social Security Act 1986.

§ Baroness Young
My Lords, I thank my noble and learned friend for his reply and for his helpfulness on this subject. Is he aware of the real concern felt by a large number of women who spend a large part of their lives abroad with their husbands and who are therefore unable to work and accrue entitlement to a pension at the end of their days? If he cannot bring forward major legislation, will he consider an amendment to the present legislation to put that point right?

§ The Lord Chancellor
My Lords, it is comparatively easy to make technical changes which might increase the flexibility of the orders a court may make on divorce. I am considering that point carefully. The essential difficulty is that in relation to pensions the event to be dealt with must be funded. The provision that has been made in most pension schemes—this applies to the point about which my noble friend Lady Young is principally concerned—relates to marriage and widowhood and does not apply additionally in respect of divorce. The problem is that further funds are required if an additional arrangement is to be made with regard to divorce. The courts, on an order in respect of divorce, cannot deal with that problem.

§ Lord Elwyn-Jones
My Lords, would not giving legislative effect to the proposals in the consultation paper be beneficial to a wife by ensuring that she does not suffer hardship by losing, where it would be inequitable for her to do so, the chance to benefit under an occupational pension scheme when her marriage is dissolved? Is there not a great deal of concern about this matter? Perhaps the noble and learned Lord can give an indication as to when the Government propose to make some positive proposals.

§ The Lord Chancellor
My Lords, the noble and learned Lord draws attention to a difficulty of which I am well aware. The representations that were made to me by my noble friend Lady Young and the representatives that she arranged should see me would have alerted me to that difficulty if I had not already known about it. I shall give a typical case of where a husband is working and the wife, not having worked, is divorced. Of course, the matter operates the other way round as well. Where the husband and wife are divorced, there will be a provision in the pension scheme for the husband to enjoy a pension. Some part of that pension can be diverted from him to the wife, and the court has power to arrange that. If he is not married at his death, the provisions which normally exist in a pension scheme in favour of a widow do not operate so there is no money available to divert to anyone at that stage. That is the real difficulty. Pension schemes provided by third parties 377 cannot readily be forced to deal with that problem unless the members of the pension scheme are prepared to put in the money needed. The state pension scheme makes certain provisions to help a divorced wife in those circumstances. It may not be convenient to narrate those provisions now. They are technical. I can do so if it is required. The position of the divorced wife when she becomes pensionable is dealt with in the state scheme. We are talking now about schemes over and above the basic state scheme. The difficulty is that when the husband dies without leaving a widow, that event is not provided for in such schemes, and therefore is not funded. There is no money available to be paid out in that event. That is the fundamental problem. At the moment I do not see a solution open to me to deal with that aspect of the problem within the context of divorce law reform or anything of that kind.

§ Baroness Seear
My Lords, is the noble and learned Lord saying that it is not possible through legal means to interfere with an occupational pension scheme in the way that the Government have laid down in the state pension scheme, where it is obviously easy for them to do so? Is it not the case that when opting-out of SERPS was introduced, it was made a requirement of opting-out that there had to be adequate provision for widows? If the state can intervene in occupational pension schemes to make adequate provisions for widows, would it not be possible also for the state to intervene to make adequate provisions for the divorced wives?

§ The Lord Chancellor
My Lords, certainly it would. Perhaps I may elaborate a little. The point is that when the state scheme says that a person can opt out of it provided he makes a guaranteed minimum provision which includes widows, then the people who are operating that private scheme have to pay for it. There has to be a provision which gives rise to contributions of money for that purpose. If in addition there were to be a provision that divorced wives had also to be provided for, that is a further provision which would require the contributors, both the employee and the employer, to provide additional money. It is not usual, although it may not be impossible, for people to provide for their divorced wives in the same way as they do for their widows. It is that requirement which underlies the difficulty highlighted here. Nothing that I can do by way of changing the law with regard to rights on divorce can meet the problem.
The problem is that that particular event has to be taken into account in the funding. If people generally want to do that in a private scheme, it is always open to them. Of course, they can. But any additional benefits require to be paid for. If there is additional benefit to a divorced wife as well as to a widow, that must be paid for by additional contributions in some shape or form. That is the essential problem.

§ Baroness Ewart-Biggs
My Lords, does the noble and learned Lord not agree that in other countries special cases are made for divorced wives of diplomatic officers whereby a proportion of the occupational pension will go to each wife? Will the noble and learned Lord say whether we can perhaps 378 learn from the experience of other countries in this regard?

§ The Lord Chancellor
My Lords, a proportion of the husband's pension could certainly go in part to the divorced wife. There is no problem about that. So long as that money is there it is for the court to say how it is divided. There may be some slight technical problem about the precise form in which that result could be achieved. That is an aspect of what this paper was about. But that result can be achieved, perhaps not in the most elegant form, by the powers which the court now has; that is to say, diverting from the divorced husband part of his pension. There is no problem about that.
What is a problem is that once he dies and has no widow, then there is no further pension for anyone provided under the scheme. There is nothing the court can do to introduce one when it is not there. That is the essential problem. If someone wants to introduce it they have to pay for it.

§ Lord Hailsham of Saint Marylebone
My Lords, I quite see what my noble and learned friend is saying. The problem cannot be cured without legislation. However, would it not be possible under the matrimonial proceedings Act so to amend the law as to give the court power to direct the husband to pay an additional premium in order to protect the wife in the situation where he envisages that she will be deprived of her source of income in the event of the former husband's death?
I should have thought that it would have been possible to give the courts such a power, during the lifetime of both parties, to direct the husband to pay an additional premium.

§ The Lord Chancellor
My Lords, as my noble and learned friend is aware, the consultation paper was dealing with the situation after the death of the husband. Of course, it is possible for arrangements to be made in which existing money, part of the joint estate, is used for a particular purpose. It would be perfectly possible to achieve the result that some part of the husband's money should be used to provide an annuity for his divorced wife after his death. That of course would be at the expense of his estate. It can be done.
All I am saying is that in order to make such a provision, money has to be found from somewhere. One cannot do it by operating on existing pension schemes in respect of benefits which are not there.