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Pensions Bill

It is with disappointment that I rise to speak for the Government on this clause, not being an accountant. In responding to Amendment No. 130A, I shall also speak to Amendments Nos. 130B, 130C and 130D. Clause 94 sets out how the pension compensation due to a member can be reduced and a credit of the same amount created in respect of the former spouse. These amendments would remove the terms ““debit”” and ““credit”” from the clause and replace them with terminology that has similar meaning. ““Debit”” and ““credit”” are terms currently used in pension sharing, and we believe it is important to take account of the existing pension-sharing legislation. Clause 94, like the rest of this chapter, has been drafted so that, as far as possible, compensation sharing follows the same principles and uses the same language and mechanics as currently apply to pension sharing. In this way we have sought to capitalise on familiarity and avoid unnecessary additional complexity. The same terms are used in Section 29 of the Welfare Reform and Pensions Act 1999, which contains a provision equivalent to Clause 94 of this Bill. Other legislation uses the same terminology as that Act. For example, Section 220 of the Finance Act 2004 uses pension credit and pension debit when setting out how a pension credit affects a person’s lifetime allowances. In due course, the Finance Act 2004 will be applied to compensation credits and debits in the same way, through regulations made by Treasury Ministers after the passage of this Bill. The feedback that we have had from lawyers—not accountants—who are likely to have to interpret this legislation, is that they welcome this approach. In addition, the provisions in the Finance Act 2004 which set out the tax treatment of pensions and PPF compensation carefully follow the same terminology as pension sharing. If we were to stray away from the existing terminology relating to credits, Parliament would need to make further changes to tax law to ensure that the beneficiaries of compensation sharing were not subject to charges for having received unauthorised payments. Again, this would only add to the complexity. I sympathise with efforts to simplify legal drafting, but rejecting the existing, accepted terms could lead to confusion. For example, were Parliament to apply these different terms, there may be an expectation that it meant there to be a difference between pension sharing and compensation sharing, when the intention is to encourage the opposite. I hope that I have been able to reassure the noble Baroness that the wording of clauses on compensation sharing has been carefully chosen to ensure consistency and familiarity. I urge her to withdraw her amendment.