Clause 13 - Shared state pension on divorce etc.

Pensions Bill – in a Public Bill Committee at 4:30 pm on 2nd July 2013.

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

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

I will address clauses 13, 14 and 15 together as they are all on different aspects of pension sharing on divorce, or PSOD, as I gather it is known; I will also address schedules 8, 9, 10 and 11.

When people divorce, they can share occupational pensions, but also their state pensions. That is done by means of instruments that are called a pension credit and a pension debit. I should stress that the pension credit in this case is not pension credit; it is a pension credit of state pension rights. The person who receives the settlement—often the woman—will get a credit on their state pension. The other person—generally the man, although not exclusively—who makes the contribution has a pension debit on their record. Clauses 13 to 15 and the relevant schedules simply explain that those concepts can be applied to the single-tier pension, detailing how the calculation is done in each case. The new arrangements are within the spirit of the current ones: if a deal is done whereby one partner passes some state pension rights, post-divorce, to the other partner, the single-tier calculation has to be adjusted to take account of that settlement.

Photo of Gregg McClymont Gregg McClymont Shadow Minister (Work and Pensions)

I thank the Minister for that explanation. The clause is drafted clearly. We talked earlier about how society has changed, with women going out to work much more, and how we want people to have individual pensions in their own right to reflect changing societal and economic norms. The clause is important because we know that divorce, for better or for worse, is a central part of our society. It is also important, because—as the Minister clearly explained—we know that, unhappily, so many divorces take place every year, and we need to get this part of the Bill right. I thank him for his explanation; we do not intend to oppose the clause.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

I would welcome the Minister’s clarification of a small point. My understanding is that the provision applies, at the moment, when people have a state earnings-related pension scheme or a state second pension, and that it does not apply to the basic state pension. In terms of what happens with the single-tier pension, does that mean that more can be shared than was previously shared, and if not, how is that accounted for?

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

The hon. Lady is right that we are discussing the sharing of additional state pensions. By analogy with someone’s occupational pension, for example, if there is a divorce and one partner is at home looking after the kids and is not able to build up an occupational pension of their own, it is right that they should be able to get part of the occupational pension of the spouse, and therefore, by analogy, with the additional state pension. Those arguments do not apply in the case of the basic state pension, because someone at home with children would be building up pension rights in their own right. The proposals broadly seek to mirror the existing structure for pension-sharing on divorce but apply it to a single-tier world. I hope that that clarifies the situation.

Clause 13 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.— (Karen Bradley.)

Adjourned till Thursday 4 July at half-past Eleven o’clock.

Written evidence reported to the House

PB 18 International Consortium of British Pensioners

PB 19 Civil Service Pensioners’ Alliance

PB 20 Association of Consulting Actuaries

PB 21 Bette Baldwin

PB 22 The Convention of Scottish Local Authorities

PB 23 British Pensions in Australia Inc

PB 24 Ray Smith

PB 25 Aubrey Derrick Prance

PB 26 Catherine M Kirby—supplementary

PB 27 Towers Watson