Pensions Bill
Item 2 is the Pensions Bill, which is United Kingdom legislation. I refer members to the legislative consent memorandum—LCM(S3)8.1—that has been lodged by the Cabinet Secretary for Justice, Kenny MacAskill, and to the note by the clerk, which is paper 1.
When the UK Parliament considers a bill whose provisions apply to Scotland for any purpose within the legislative competence of the Scottish Parliament, a Scottish minister must lodge a legislative consent motion to seek the Scottish Parliament's consent to the relevant provisions in the bill. Before such a motion is lodged, a minister must lodge an associated memorandum, which the relevant committee must consider and report upon. Agenda item 2 is consideration of one such memorandum.
I welcome, for his first appearance before the committee, as I recollect, Fergus Ewing, the Minister for Community Safety. He is accompanied by Ian Turner, who is head of the family law and administrative justice team at the Scottish Government, and Fiona Glen, who is a solicitor in the constitutional and civil law division of the Scottish Government.
I invite the minister to speak to the memorandum.
Good morning, convener and members. I am grateful for the opportunity to present to the committee the legislative consent memorandum on the Pensions Bill. Members have the memorandum and the list of amendments to the Pensions Bill and I do not intend to repeat their contents at length. The amendments were agreed to in committee at Westminster on 21 February, so they now form part of the bill. For the sake of clarity, however, I will still refer to them as amendments today.
As the committee knows, the majority of the bill relates to reserved matters. The devolved matters that are under consideration relate to orders that a Scottish court may make in relation to pension compensation on divorce or dissolution of a marriage or civil partnership, and to provisions that can be made in qualifying agreements.
The pension protection fund was set up to pay compensation to members of eligible defined benefit pension schemes when their employer becomes insolvent, a scheme rescue is unlikely and the pension scheme is left underfunded. The court can take account of pension compensation in divorce actions but it cannot deal with it in the same manner as pensions because, in law, compensation is not a pension. The policy is straightforward: we want to ensure that couples in Scotland can agree a financial settlement and that courts can make orders to share such compensation on divorce or dissolution as would have been done if the pension scheme had not entered the pension protection fund.
Although we are not aware of any cases so far in Scotland in which people have lost out, the proposal is consistent with Scots family law as it will enable former spouses or civil partners to achieve a clean-break settlement more easily. The provisions will also ensure that the relevant Scots law keeps pace with changes to pensions legislation.
Although the policy is straightforward, the legal changes that are required are less so, largely because of the interaction between pensions law, which is reserved, and family law, which is devolved.
Amendment 6 extends the activation of pension compensation sharing orders to Scotland by inserting in clause 84—now clause 92—a reference to the Family Law (Scotland) Act 1985 and to provision in qualifying agreements. Qualifying agreements are important in this respect because they are used in Scotland, not in England and Wales. They currently allow couples to agree pension sharing on divorce or dissolution of a civil partnership without going to court. The amendments enable them to extend the agreement to include pension protection fund compensation sharing in the same way.
Together, amendments 17 to 19 insert a new schedule. The memorandum provides information on the bill's main elements.
Essentially, the bill now proposes a scheme to enable the courts to deal with pension compensation in the same way as pension sharing. It also allows the court to make orders and makes the appropriate changes to the references to qualifying agreements.
The Scottish ministers will have a new power to make appropriate regulations in relation to the verification or apportionment of benefits under PPF compensation. That is based on their current power to make provision in respect of the calculation and verification of benefits under a pension arrangement.
A number of consequential amendments that are essential to ensure that proposals on reserved matters work in a practical sense have also been made.
I ask members to note two other aspects that we are working on. I stress that they should neither detract from the proposed legislative changes nor prevent the committee from supporting the motion.
The bill follows the principle that the costs of a divorce are to be met by the parties to the divorce. I have been informed that the costs associated with a pension compensation share from the PPF might be up to £3,000. That figure seems very high to me, and officials are clarifying the position with the Department for Work and Pensions.
The bill contains no proposals for allowing pension sharing in respect of payments under the financial assistance scheme, which, before the PPF's introduction, helped members who lost out on occupational pension schemes. As United Kingdom Government ministers had indicated that they were looking at the issue, I was mildly surprised to learn that the scheme was not covered in the bill and in the spirit of amicable co-operation I will press the UK Government to implement a financial assistance scheme sharing system as soon as it is practical.
I ask the committee to support Scotland's participation in the bill and to agree to the legislative consent motion. I am happy to provide further clarification of any points and to answer members' questions.
Thank you, minister. Do members have any questions?
In light of the minister's final couple of comments, I wonder whether he can explain the course of action that he will take if his discussions do not go the way he wants them to.
I should make it clear that no cases of which we are aware in Scotland are affected by this proposed legislation, which is, after all, highly technical and might well have very limited application—although if, for example, the stock market were to crash, the PPF would become very prominent on the political radar.
While preparing to appear before the committee, I became aware that applying for a pension compensation sharing order can cost as much as £3,000. That seems inordinately high for any couple, one member of whom might have a modest pension fund of, say, £50,000 to £80,000. I am concerned that if the company that held that fund was unable to pay out and the PPF were brought into play, £3,000 would be a very high price for a couple to pay for an order.
Having spent a couple of decades carrying out matrimonial work and advising clients who were going through a divorce or dissolution of a civil partnership of their rights with regard to making a claim for financial provision in respect of the value of an occupational pension, I know that such pensions can very often be the asset of greatest value—and, indeed, of greater value than the family home. Although such matters are important, I do not expect them, in the current circumstances, to become excessively controversial.
As I do not want Cathie Craigie to say that I am unwilling to answer her question, I will say that I expect to have very cordial discussions with my Westminster counterpart that I very much hope will bear fruit. I do not wish to contemplate a situation in which the outcome of those discussions might be less than satisfactory.
If the amendments that you want to be tabled are not accepted, will you still go ahead with the legislative consent motion, or will you advise Parliament that, at some point further down the line, the Scottish Government might introduce legislation itself?
I am not seeking any amendments to the bill; I am simply asking the committee to agree to the memorandum to enable this corpus of law to form part of Scots law and, indeed, to give the Scottish ministers additional powers. I very much hope that the points that I will make to my Westminster counterpart will be taken on board, but we shall see what we shall see.
I certainly hope that the committee sees the need for this legislation to be in place in Scotland. Without it, couples contemplating divorce or the dissolution of a civil partnership would have no clear statutory means of resolving between themselves the division of compensation from the PPF. My main purpose—indeed, my sole purpose—in appearing before the committee is to seek members' agreement that my argument is robust and merits the approval of this memorandum. I undertake to keep the committee advised of our discussions with Westminster on the two points that I have highlighted.
We are obliged for that, minister, but I think that we will deal with problems when and if they arise.
If there are no further comments, I ask members to note the memorandum. Are members agreed?
Members indicated agreement.
Under rule 9B.3.5 of standing orders, the committee is required to report on the memorandum. It will be only a short report to confirm that the committee is content.
I thank the minister for his attendance. I suspend the meeting for a change in the ministerial team.
Meeting suspended.
On resuming—