In July 2019, the Pensions Advisory Group (PAG) revealed its important information to the therapy of pensions on divorce. The report is on the market on the Nuffield Basis web site. The impression of the report will be seen within the weight hooked up to it in three current choices regarding the therapy of pensions on divorce. These handle points that are generally disputed:

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1. Whether or not pensions must be divided as to capital worth or revenue.

2. Ringfencing pension acquired pre-marriage or throughout an extended interval of separation.

3. The off-setting of pensions.

In W v H (divorce monetary cures) [2020] EWFC B10, HHJ Hess (who’s the co-chair of PAG) thought-about a case during which the husband’s outlined profit pension was value £2.1m, but the fairness within the household residence was value solely roughly £240,000. Each events had vital money owed. Hess handled the matter as a wants case.

The second matter was heard by HHJ Robinson and reported as KM v CV [2020] EWFC B22. The matter involved a police pension and an extended interval of separation: the events had separated in 2011. The pension holder, on this case the spouse, argued that the pension must be valued as on the date of separation, somewhat than the date of trial.

Lastly, RH v SV [2020] EWFC B23 was additionally a judgment of HHJ Robinson. Equally, with the opposite two instances, the pension was the most important asset: the husband’s pension had a money equal worth (CEV) of practically £1.5m.

Dividing pensions as to capital or revenue

In W v H, HHJ Hess noticed:

1. There isn’t a ‘one-size-fits-all’ reply to this query. For instance, the place the CEVs are comparatively small or the place the events are comparatively younger, dividing pensions by reference to capital values could be applicable.

2. In contrast, there are eventualities the place a easy break up primarily based on capital might effectively not obtain a good answer, for instance the place the pensions are medium or giant, however wants points come up. That is significantly the place one get together has a pension inside an outlined advantages scheme, and the place the events are nearer to retirement.

3. HHJ Hess makes particular reference to the PAG report which states, ‘in a needs-based case, specifically the place there may be vital outlined profit pension concerned, for the events or courtroom looking for to establish a good end result, the suitable evaluation will typically be to divide the pensions individually from the opposite property, primarily based on an equalisation of incomes method, such method typically requiring skilled proof from a PODE [pensions on divorce expert]’.

Ringfencing pensions

This concern was addressed in all three judgments, with specific reference to the views of the PAG. In W v H, Hess acknowledged that though it was a longtime apply in some courts to make a straight line apportionment of pre-acquired pension, the method carried with it ‘vital dangers of unfairness’. Though it’s typically mentioned that the judgment of H v H [1993] 2 FLR 335 helps such an method, Hess famous that when that judgment was delivered pension sharing didn’t exist, White v White had not been determined and the usage of CEVs was not widespread.

In all three choices, the therapy of pre-acquired or post-acquired pensions was largely thought-about within the context of wants. In each of his choices HHJ Robinson quoted from the PAG’s report as follows:

1. It’s clear that in a wants case, the courtroom can have resort to any property, at any time when acquired, with a view to make sure that the events’ wants are appropriately met. In contrast, in a sharing case, the therapy of a pension as non-matrimonial property is a reside concern.

2. Broadly talking, in wants instances, the place the property don’t exceed the events’ wants, apportionment is never applicable.

3. It should typically be truthful to purpose to supply the events with comparable incomes in retirement, however equality might not be the truthful end result relying on wants, contributions, well being, ages, the size of the wedding or, in non-needs instances, the non-matrimonial nature of the asset.

In KM v CV, HHJ Robinson held that the related date for assessing the worth of the pension was clearly the date of trial and never 2011. In W v N, HHJ Hess additionally warned in opposition to the straight-line methodology of calculation. Particularly, outlined profit pensions will accrue far more in worth in later years when the member partner has reached a excessive wage degree. Accordingly, the place an apportionment is to be made, the straight line methodology of apportionment might effectively not be truthful.

Offsetting

HHJ Hess notes the orthodox view inspired by the Court docket of Enchantment in Martin-Dye v Martin-Dye [2006] 2 FLR 901, that pensions must be handled individually and discretely from different capital property. He additionally famous that the PAG report presents the same view. He nonetheless notes that many litigants select to blur the distinction between the classes and have interaction in an offsetting train. He did observe that such an method runs the danger of unfairness.

Offsetting was not a difficulty addressed by HHJ Robinson, though in RH v SV he famous that there was nothing inherently flawed with aggregating the worth of capital and pension property for the aim of comparability, supplied that it’s recognised that this isn’t a comparability of equal values. He acknowledged that supplied it’s recognised that the orchard supplies various kinds of fruit, it’s flawed to take a look at the division of the overall crop. The PAG report particularly addresses the apply of offsetting and addresses the dangers which come up. It notes that the place there have been claims of negligence made in opposition to household attorneys in a area of pensions, it has overwhelmingly been in instances the place offsetting has been the chosen treatment and never pension sharing.

A ultimate level to notice is that the PAG report states that the place the mixed pensions are value lower than £100,000, a PODE report will not often be justified.

 

Andrew Newbury is a companion at Corridor Brown Household Regulation