Clause 87

Pensions Bill – in a Public Bill Committee at 11:00 am on 19th February 2008.

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Reduction of compensation

Amendment made: No. 171, in clause 87, page 41, line 6, after ‘order’ insert ‘or provision’.—[Mr. Mike O'Brien.]

Question proposed, That the clause, as amended, stand part of the Bill.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I am again on a search for knowledge. A lot of issues will be raised with the PPF and a lot of calculations will have to be made, some of them in respect of relatively small claims. After analysing some of the figures, it is clear that, for both the PPF and the FAS, the size of payments will range dramatically, from relatively small to relatively large. Has any work been done on the extra administrative cost to the PPF of the provisions? There will clearly be a significant administrative cost. One could establish a likely cost based on the number of divorces a year, which is sadly increasing all the time, the claims on the PPF and the number of sharing orders a year. How might that impact on the administrative levy that pays for the PPF? The Minister might not have such facts at his fingertips, so I am happy for him to write to me about them. It strikes me that there may be a not insignificant extra cost on the PPF.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

Usually, the administrative costs to carry out such an exercise would be levied on the couple in a divorce settlement. The cost of the exercise would be something for them to identify. The PPF will need to work out the cost to it of the exercise and then charge for it. The hon. Gentleman referred rightly to the relatively high level of divorce in this country, but in most cases—not all, because some will be pre-retirement matters—we will be dealing with pensioners, and the divorce rate among pensioners is not as high as it is otherwise.

Not a very large number of people will be affected, so it is unlikely that the administrative costs to the PPF will be substantial and, thus, the cost to individuals who request an administrative processing of their claim is not likely to be great. The cost of having a pension share carried out by the PPF will depend on exactly what activities the board will have to undertake, but it is expected to be in the region of up to £3,000, which means that a couple undergoing a divorce or dissolution of a civil partnership will pay similar costs whether they are sharing a pension or PPF compensation.

The board of the PPF intends to charge divorcing couples similar rates as recommended by the National Association of Pension Funds, which obviously has to carry out similar exercises for divorces. I hope that I have dealt with the hon. Gentleman’s question.

Question put and agreed to.

Clause 87, as amended, ordered to stand part of the Bill.