§ "(3A) An equal treatment rule has the effect that where—
- (a) an unmarried partner is employed on like work with a married person in the same employment,
- (b) an unmarried partner is employed on work rated as equivalent with that of a married person in the same employment, or
- (c) an unmarried partner is employed on work which, not being work in relation to which paragraph (a) or (b) applies, is, in terms of the demands made (for instance under such headings as effort, skill and decision) of equal value to that of a married person in the same employment,
§ (3B) For the purposes of subsection (3A), an unmarried partner is a person who—
- (a) is living with another person of the same sex or of the opposite sex in the same household; and
- (b) has been living with that person in the same household for at least two years; and
- (c) is living (luring the whole of that period as the husband or wife of that other person."").
§ The noble Baroness said: My Lords, we now come to a different aspect of pension provision. Amendment No. 41 is concerned with equal treatment. It seeks to ensure that unmarried partners of pension scheme members have similar rights to those of married partners of scheme members. In putting down the amendment I intended a move in the direction of what seems to me to be a more modern way of thinking.
§ I am a proponent of marriage. After all, before I became a widow I had been happily married for over 40 years. But one has to admit that society is changing. In many ways I think that it is improving. It is becoming more tolerant of lifestyles which depart from the traditional. An increasing number of couples remain in stable relationships for many years without getting officially married; and the same is true of same sex couples—lesbian and gay couples—some of whose relationships are more harmonious and more stable than others in more conventional arrangements. The number of cohabiting couples is expected to rise to about 3 million in 2001. Cohabitation is now socially accepted, with only a minority of people disapproving, even in the older age groups.
§ The proportion of adults aged 16 to 59 cohabiting has risen to around 25 per cent, which is double the level of 15 years ago. One-third of all births are now outside marriage, but three-quarters of them are registered by parents living together at the same address.
§ The rights and responsibilities of cohabitees are increasingly being recognised in other areas: by the Government in relation to housing and social security; by the law in relation to inheritance and compensation; by the Law Commission in its forthcoming report on property rights of home sharers; and by the Law Society which recommended that cohabitants should obtain equivalent rights to pensions as divorcees on separation.
§ Moreover, the Government, through the Minister, often tell us that times have changed and that we must therefore modernise in order to keep up with these changes; hence the amendment that I have put before your Lordships today. I tabled it at the request of my union, MSF. The text was originally drafted by the union's lawyers. Unions often have to cope with pleas from unmarried partners of deceased members and it is difficult to tell a woman who may have lived with a man for more than 20 years and had his children that she has no legal claim under a pension scheme. But that has happened on a number of occasions and the same is true of same-sex partners.
The text of the amendment, however, does not rely on the test of dependency. I am advised that in certain other areas of the law, the tendency has been to move away from dependency and to rely on cohabitation. For example, the Inheritance (Provision for Family and Dependants) Act 1975 was changed in 1995 at the instigation of the Law Commission. The commission
recommended that cohabitants should be able to apply for benefits under the 1975 Act without the need to show dependency. As a result, a new category of cohabitant was inserted into the Act defined as a person who:
during the whole of the period of two years ending immediately before the date when the deceased died … was living
A similar definition appears in Section 1 of the Fatal Accidents Act. Again, there is a reference to two years immediately prior to the date of death. In the amendment, however, the draft defines the two-year period by reference to the date when any claim is made.
§ I hope that the Minister will be willing to look with favour on what is proposed here, even if the text as it stands may not be completely acceptable. I also hope that it will not be opposed on grounds of cost. To do so would be most unfair to unmarried partners as the scheme member will in most cases have had to pay the same contribution as that paid by the deceased partner in a married relationship.
§ However, I am indebted to Stonewall for some excellent research material produced last year, copies of which were sent to the then Minister of State a t the DSS, Mr John Denham. A detailed questionnaire was sent to a number of top pension schemes. The results show that partners' pensions, where these are provided, do not create significant additional administration costs and that, indeed, costs as a whole are not an issue. Most schemes would not want to increase members' contributions in order to meet the cost of partners' pensions. Indeed, it is surely clear that in making actuarial assumptions about the level of contributions required, actuaries must assume that each scheme member will have a partner, so whether that partner is married or unmarried must be immaterial.
§ It is clear that many pension schemes are making an effort to provide partners' pensions for unmarried and same-sex partners. But Inland Revenue rules, which allow pensions for unmarried and same-sex partners only at the trustees' discretion, can sometimes make for difficulties and complications. The arguments that partners' pensions would place financial burdens on employers and act as a disincentive to the continuation of final salary pension schemes does not appear to be substantiated.
§ I know that changes in society and the way in which society looks at issues take some getting used to, but after a while they become accepted. I well remember back in the 1970s when I was a union official, making a proposition during negotiations on a pension scheme with a very large employer; an employer, moreover, with a very good reputation for employee relations. I suggested that widowers' pensions be provided in the scheme; they already had widows' pensions. The employer's representatives on the other side of the table looked at me in horror and said, "Widowers' pensions—you can't be serious". Now we take widowers' pensions for granted and we accept that widows and widowers should have equal treatment. It 131 would be contrary to our perception of equality for that not to be so. I hope that we shall be able to take the same steps to keep up today and to accept my amendment. I beg to move.
§ 10.30 p.m.
§ Lord Goodhart
My Lords, this is an extremely important amendment and one which we support in principle. It would now be widely accepted that where two unmarried adults, whether of the same sex or of different sexes, are living together in a personal relationship, and where one is financially dependent on the other, that dependency should be recognised by the terms of pension schemes. "Dependence" should of course include inter-dependence.
As the noble Baroness has explained, the purpose of the amendment is to go further than that and to provide something equivalent to a widow's or widower's pension as of right and not merely to extend it to cases of dependency. Again, that is a position with which my party would agree. But while we accept the position in principle, there are certainly problems with this particular amendment. I do not believe that it in fact achieves what it sets out to do. I do not believe that it is appropriate for me to explain why that is the case—no doubt the Minister will do that.
If that objective is to be achieved, it will need a great deal of careful thought. There are issues relating to how one defines the relevant personal relationships. I am not sure that simply living in the same household for two years would in itself be a wholly satisfactory test. However, it is desirable that more thought should be given to the matter. We should certainly like to see the Government undertaking first to set up a study of when and how it would be possible to provide pensions for unmarried partners on a basis equivalent to that for married couples. We should also like the Government to undertake to come back with appropriate proposals in future pensions legislation.
§ Baroness Hollis of Heigham
My Lords, I thank my noble friend for what I thought was a powerful and moving speech. As always, her arguments are cogent and eloquent.
It may be helpful if I begin by explaining briefly the requirements of Section 62 of the Pensions Act 1995. Section 62 sets out the equal treatment requirements for OP schemes. In general terms, schemes need to treat men and women equally if they do the same work or work of equal value. For example, men and women must be offered access to the scheme on equal terms. They also receive the same benefits in relation to service from 17 May 1990. The proposed amendment would extend the equal treatment requirements to married and unmarried couples. As my noble friend has said, the main area affected would be the payment of survivors' benefits.
At present, Inland Revenue rules allow survivors' benefits to be paid to anyone who is financially dependent or inter-dependent on the deceased person. Therefore there is already scope to carry out what the 132 amendment seeks to achieve. As we said in the Green Paper, we do not believe that new provisions are needed in the legislation. Employers who offer occupational pension schemes decide whether or not the scheme will provide survivors' benefits. For example, some schemes may be non-contributory, but one may have to contribute extra if one is to receive survivors' benefits in one's particular case.
If those benefits are provided, scheme rules may specify that they are payable only to widows and widowers. However, evidence suggests that a growing number of schemes no longer restrict survivors' benefits to married couples. Many schemes now provide survivors' benefits not only to unmarried heterosexual couples, but also to same sex couples. The Government welcome that provision.
The NAPF national pension fund survey of 1988 indicated that 75 per cent of private sector schemes provide pensions for unmarried partners and 45 per cent of them for same sex partners on a discretionary basis. However, the public sector's statistics show that the equivalent to 75 per cent for unmarried partners in the public sector is 28 per cent, and for same sex partners 45 per cent in the private sector is 20 per cent in the public sector. As I say, this is a matter for scheme trustees.
The proposed amendment would compel schemes to provide survivors' benefits to married and unmarried couples on the same basis. We cannot support this amendment for two basic reasons. First, we must remember that if we compel schemes to extend survivors' benefits, that will result in increased costs for those schemes that currently restrict survivors' benefits to widows and widowers. Although accurate costs are difficult to estimate, the Government Actuary's Department has suggested that the costs could be in excess of £½billion a year for each year of future service. Those costs should not be inflicted lightly on schemes and contributing members.
My noble friend suggested that members would pay the same contribution whether they were married or not and asked why they should not give them the same level of benefit? But my noble friend, who has more experience in pension matters than perhaps any 20 of us in this Chamber, will know that the actuary takes account of the benefits to be provided under the scheme rules and makes assumptions on matters like the proportion of members who are married at retirement or death. That assumption would have to be increased and would have to be reflected in contribution rates if more people were eligible for survivors' benefits. Therefore costs could and would increase.
Secondly, we need to consider the cost for public service schemes which are funded by public expenditure and thus the general taxpayer. As I say, there lies the biggest gap in this form of provision. It has been estimated that £200 million of the figure just mentioned of £1 billion would be for public service schemes. Therefore, any such move to extend survivors' benefits would need detailed consideration with all those who would face extra costs.
133 For example, when we debated Amendment No. 23 earlier, my noble friend expressed her concern that the introduction of stakeholder schemes could act as an incentive for employers to close down their occupational pensions. Yet stakeholder pensions will not make any difference to the cost of providing an occupational scheme. By contrast, this amendment could impose substantial extra cost on those schemes. In some cases, employers might believe that it would make the future of the scheme unviable. Therefore, while I understand the intention behind my noble friend's proposal and personally sympathise with it, I must stress that this is a complicated issue. It would be rash to legislate. I am not going to go into why this amendment might be technically deficient. I do not believe there is any point because my noble friend was arguing from the point of principle. I very much hope that schemes which have discretionary powers will choose to move in this way. But we believe that for the time being schemes are best left to make their own decision.
In terms of the thoughtful contribution of the noble Lord, Lord Goodhart, I was reflecting on whether there would be additional advantage in looking at the matter further. I cannot give that undertaking at the moment. However, this is an issue which has come before the Government several times already—certainly since I have been on this side of the Chamber. I believe it is fair to say that the Government are very sympathetic to the extension of such rights where possible. As I say, our difficulty is that we do not want, on the one hand, to make stakeholder schemes less cost effective and, on the other hand, the implications for the public service schemes are really rather substantial. I hope that the tide is moving in the direction of my noble friend's proposals. But, as I say, I believe this is an issue which is yet to be resolved. With those comments I would hope that my noble friend could withdraw her amendment.
§ Earl Russell
My Lords, before the Minister sits down, perhaps she could confirm that she and I both belong to the university superannuation scheme which is perhaps the only scheme which for a long time has made the type of provision for which 'this amendment asks. Has she ever heard any member of that scheme complain about the resulting cost?
§ Baroness Hollis of Heigham
No, my Lords, because while those university schemes are not as well paid as they would like to be, they are relatively better paid. The salaries of university lecturers start at £17,000 and go up to about £50,000 for vice-chancellors. That is very different from stakeholder or other occupational schemes. Also, the university scheme is privately, not publicly, funded such as those for the police, teachers, the Civil Service or whatever. That is where the costs would fall on the Exchequer.
I agree with the push of the noble Earl's question. If schemes put the question to their membership with full and proper information about the extension of choice in lifestyle that would then be available without worries for the future, that could prove compelling and 134 members might be willing to pay the extra cost. I hope so. At the moment, the Government's position is that it is for private schemes to determine, within their discretionary powers, whether to extend benefits. There is nothing to stop the membership of such schemes pressing for the extension of benefits to unmarried partners. If they were to do so, I would be cheering them on.
§ Baroness Turner of Camden
My Lords, I thank my noble friend for her sympathetic response and the noble Lord, Lord Goodhart, for his support. I accept that the wording of the amendment is not all that it might be and, for that reason, I do not intend to press it to a vote. I am grateful to the Minister for giving the clear impression that the Government are very sympathetic and that the times are moving in this direction. I am glad to learn that 75 per cent of private schemes already comply with the general thrust of the amendment. I was aware that there had been a lot of progress in that respect in recent years.
The problem lies with public sector schemes—the exception being the USS, to which the noble Earl referred. Unfortunately, public sector schemes have not moved as fast. In light of the Minister's statements this evening, I hope that the remaining 25 per cent of private sector schemes that have not followed suit will feel inclined to do so. One hopes that attention will be paid to the Government's views and that eventually, with public sector schemes, unmarried partners will receive the equality of treatment to which they are entitled. Meanwhile, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 16 [Excessive pension contributions made by persons who have become bankrupt: Scotland]:
Lord McIntosh of Haringey moved Amendment No. 42:
Page 21, line 26, leave out ("debtor's").
§ The noble Lord said: My Lords, in moving this amendment, I would like to speak also to Amendments Nos. 43, 44. 56, and 229 to 257. This group of amendments makes changes to the provisions for the protection of pensions on bankruptcy. These are complex measures and parliamentary counsel has taken the opportunity afforded by the Summer Recess to look again at the way in which they are drafted. The amendments simply correct or clarify the legislation. They do not involve any changes in policy. May I stop there or shall I explain the amendments in more detail?
§ Lord Astor of Hever
My Lords, the House will be grateful to the noble Lord for his explanation of the amendments. We are concerned about the intention behind the drafting of Amendments Nos. 229 to 257 relating to the Bankruptcy (Scotland) Act 1985 and the Insolvency Act 1985. Our concern focuses on the 135 proposal to delete references to "excessive contributions" and to replace them with the term "is recoverable". If these amendments were to be accepted, the consequences for the creditor of the debtor who is bankrupt may be very serious indeed.
If a debtor tried to defeat the interests of a creditor by entering into a pension-sharing transaction which could be deemed to be a gratuitous alienation or unfair preference in terms of the Bankruptcy (Scotland) Act 1985 or the Insolvency Act 1985 and made excessive contributions into that arrangement, the creditor, as the Bill currently stands, would be entitled to claim the amount to which he or she is legally entitled; namely, the full extent of the excessive contribution.
If, however, the House accepts the amendments, the creditor's rights would be limited to the extent of what is "recoverable". In some situations, that could be significantly less than that to which the creditor should be legally entitled. Accordingly, in those situations the debtor would have successfully frustrated the interests and rights of the creditor by placing beyond his or her grasp the difference between the excessive contributions and what is recoverable.
We do not accept that this is a desirable policy objective. We want to prevent pension sharing becoming a source of problems for the courts in years to come. We therefore hope that the Government will give this matter serious consideration before Third Reading.
§ 10.45 p.m.
§ Lord McIntosh of Haringey
My Lords, I did my best, but I should have read out the fuller brief. I shall have to do so now because the noble Lord is entitled to a proper answer to his questions. He referred particularly to the amendments which relate to the Bankruptcy (Scotland) Act.
Amendments Nos. 42 to 44, 238, 245 and 246 are only there to ensure consistency in the usage of terms with the rest of the Bankruptcy (Scotland) Act. I do not think that the noble Lord will have any problem with that.
Amendments Nos. 233, 234, 242, and 244, together with Amendments Nos. 250, 251, 254, and 256 make clear the position of the former spouse in relation to the recovery of excessive contributions from her pension share. Although it is generally accepted that there needs to be a mechanism to recover excessive contributions that are contained in the former spouse's pension share, I think we would all agree that the provision needs to be carefully drafted so that only the excessive contributions, and nothing more, are recovered. That is what these amendments do. The amendments make it clear that it is only the balance of any excessive contributions not recovered by the court order against the bankrupt that can be recovered from the former spouse.
Amendments Nos. 229 to 232, 235 to 237, 243, 247 to 249, 252, 253 and 255 are further technical amendments. In the comments I have just made, I referred to the recovery of excessive contributions 136 from the former spouse's pension share. I used the phrase "excessive contributions", however, as a shorthand term. Properly, the phrase is best restricted to the bankrupt and his contributions to the pension. What may be recoverable from the former spouse is an amount equivalent to those excessive contributions, if any, which cannot be recovered from the bankrupt's pension. These amendments bring out that technical distinction. I assure the noble Lord that although the term "excessive contributions" is being replaced, this is purely a technical change and the policy remains unchanged.
Perhaps I may say a word about bankruptcy law in Scotland because that was the thrust of the noble Lord's argument. Current bankruptcy law in Scotland provides that the permanent trustee in bankruptcy can apply to a court to seek recovery of property or funds in three circumstances where he believes that a transaction has had the effect of defeating creditors: first, gratuitous alienation, where property has passed to another person at less than full value; secondly, unfair preferences, where one creditor has been unfairly preferred to another and, thirdly, he can also apply to overturn a court order made on divorce. The new measures allow recovery from the former spouse's pension share but build on those existing provisions.
I would be happy to answer any questions which the noble Lord may have. Indeed, I shall ensure that the questions he raised are dealt with in a letter which I shall write to him before Third Reading. I hope that he will agree, on that basis, that it is appropriate that I should commend the amendments to the House.
Lord McIntosh of Haringey moved Amendments Nos. 43 and 44:
Page 22, line 12, leave out ("debtor's").
Page 22, line 35, leave out ("debtor's").
Lord Higgins moved Amendment No. 45:
Before Clause 17, insert the following new clause—