My Lords, we move on to a different subject, which is pension sharing on divorce. This is a very simple, short amendment that raises the issues of divorce that were touched on in previous amendments. When we delivered pension sharing on divorce—many of my noble friends were absolutely vital in that activity in the 1990s—it primarily affected private pensions. We thought that the portion that could be set aside as part of the divorce settlement would be the basis of a useful pension for the divorced spouse—usually the woman. We were also anxious
that he and she would build on—or, in his case, perhaps rebuild—their pension shares back up again so that both would face retirement with an adequate pension. However, most divorcing spouses do not seek pension sharing. In some cases, obviously, there may not be much pension to share, particularly if the divorce takes place at a relatively young age—often, sadly, younger women do not always properly value their husbands’ pension, and solicitors, I am afraid, are still pretty sleepy about what is quite a technical issue. Many of those who share pensions do not realise the need for or the possibility of rebuilding their separate pensions. However, out of 120,000 or 125,000 divorces a year, an average of 10,000 divorces involve pension sharing, which means that 8% or 9% of total divorces involve pension sharing of private occupational pensions.
This amendment asks what the implications are for the new state pension. Currently, under existing laws—we clarified this again in a previous discussion on divorcees—upon divorce the woman can substitute the man’s NI record for BSP in lieu of her own at the point of divorce, if his is the higher, and she may also be entitled to half of his additional pension—SERPS or S2P—if the court so decrees as part of the sharing of matrimonial assets.
Under the new regime, she will not be able to substitute his NI contributions for her own, a point that we argued a few amendments back. The only element that can be split or shared, if the court decrees it, is the protected pension; for example, the frozen, additional amount from SERPS and S2P, to which my noble friend referred on a previous amendment. What is more, if he has a shortfall in his NI contributions towards the new state pension—possibly because he has a track record in the public sector, I imagine, with contracting out—some of his additional pension will be brought over to make good his NI record and that transferred slice of protected pension will not then be available for sharing. I am assuming a genderised position here, I am afraid. So she takes the double whammy: not only does she not get an ability to substitute his NI contributions for her own for the basic state pension element, but, equally, if he has an inadequate NI contribution—that may well be the case if he has had a lifetime of contracting out, has never had head space and wishes to make good his shortfall in the new state pension—as I understand it, she will then not be able to access that chunk of his protected and S2P or SERPS pension, which will go across to make good the shortfall.
I would be grateful if the Minister would confirm that I have understood this correctly. If so, the woman has a pretty nasty deal and I think some explanation of the implications is required, particularly for women who have childcare responsibilities and so on and who may not be able to rebuild the additional income, particularly once their youngest child hits 12.
Advising people annually of their pension debit—for example, telling him, as it is usually, but not invariably the man, by how much the pension has reduced following divorce, or with regard to pension credit, the fraction that usually has gone to her of the protected additional pension, if the court has so decreed—would allow
each of them to know where they stand to make better decisions about their pension futures and, in particular, that might encourage them into NEST to build or rebuild their total pension prospects.
With this amendment, I am seeking to ask the Minister to ensure that women who may not be aware of, but who could well take advantage of, a share of the additional protected pension have the knowledge that they can do so. They may wish to set that against other matrimonial assets that may otherwise go their way on divorce. I hope, therefore, that the Minister will agree with me that as this is techie and this has now been changed substantively in the Pensions Bill, those women who have been married to someone in the public sector—the reverse could equally well be true in terms of gender—will be a loser a second time because he may well dip into this to make good his NI shortfall. I hope that the Minister will agree with me that we need to encourage people to be aware of the situation and I think that the department needs to take some responsibility for ensuring annual information. I beg to move.