02 November 2007
Pensions minister Mike O'Brien is set to lift the legal ban on divorcees accessing their spouse's retirement income under the state's Pension Protection Fund, Public Finance can reveal.
The move will help thousands of women who could otherwise face poverty in retirement.
Forthcoming legislation, to be announced in the Queen's Speech on November 6, will also establish the Personal Accounts system of low-cost pensions for UK residents, O'Brien confirmed this week.
The system would include 'a series of hurdles' set up by the government to stop employers closing occupational schemes and 'levelling down' their provision.
O'Brien told a Public Finance/Deloitte round-table debate on long-term care and pensions, held in London on October 29, that 'we intend to legislate to ensure PPF compensation can be shared'.
The government has already outlined plans to improve the basic state pension for women, who are more likely to suffer poverty in retirement because career breaks or care responsibilities mean that they have fewer tax contributions.
The PPF is an emergency state fund set up to cover 90% of occupational pension liabilities (up to £25,000) at insolvent firms. It is expected to cover payments to around 100,000 workers, but current rules, drawn up by the Department for Work and Pensions in 2005, prevent pension-sharing by divorcing couples.
'At present it is not possible to divide PPF compensation upon divorce – although courts take it into account – and we want to make things simpler and fairer, especially for women,' O'Brien said.
The urgency of reforms to retirement provision was also exposed during a stark discussion of long-term social care across Britain.
Round table participants heard warnings from two members of the Royal Commission on Long-Term Care, which reported to ministers in 1999.
Lord Stewart Sutherland, the commission's former chair, attacked the inconsistent treatment of long-term needs across council boundaries in England, and welcomed the government's forthcoming green paper on social care as a chance to tackle embedded problems.
Lord David Lipsey called for a more realistic assessment of costs. 'The resources available for long-term care… are grotesquely, grossly and disgustingly inadequate,' he warned.
Full coverage of the Public Finance/Deloitte round table will appear in next week's issue
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