Divorce pension-splitting put back until 2000 at the earliest
Wednesday 31 July 1996
The Green Paper published this week is open for comment until 29 November, and a White Paper will be produced next spring. But the junior social services minister, Lord Mackay, has made it clear that this government believes pension-splitting will have to wait until at least the year 2000. The main stumbling block seems to be that splitting entitlements to the state earnings-related pension scheme will not be feasible until at least the year 2000 because the existing DSS computer cannot cope, and the Government claims 2000 must therefore be the earliest date for comprehensive legislation. One consequence is that until then all divorcing couples will have to rely on earmarking, and once earmarking has been applied in individual cases it will not be possible to re-open the settlement and switch to pension-splitting.
Under the Government's preferred options ex-spouses can be awarded a separate entitlement in pension funds which have not been fully funded (for example, the pensions of civil servants and local authority workers) but they will not be able to transfer these rights to a portable pension because putting up the lump sum would cost the Treasury millions. This may leave ex-spouses as "shadow" members of funds, with tiny entitlements they can neither add to nor consolidate.
The inclusion of pensions in divorce settlements is generally welcome, although there may be a risk that men in particular may find contributing to pension funds less attractive when they can no longer be put out of the reach of former spouses, and there will be increased administrative costs. But the delay will disappoint most reformers. According to Andrew Black, marketing manager of Standard Life, the insurance companies that market portable pensions and managers of company schemes see pension- splitting as fairer and cheaper than earmarking because it is a one-off charge.
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