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Pensions on divorce – where are we now?
May 4, 2021
The courts are slowly changing the way they deal with pensions on divorce.
Pensions are notoriously complex so I’ll try to keep this simple and not too dull! For the past few years it has been almost standard practice for the courts to ignore an element of pensions accrued before a marriage/relationship. They would generally share equally the pension accrued during the marriage/relationship.
Just to be clear this has never been the automatic position; but it felt like it was, because this was applied in so many cases.
As always, the starting position is the law – the Matrimonial Causes Act 1973. There is nothing in there about ignoring pensions – instead, it’s all about needs.
This is what has been picked up in the Pension Advisory Groups report on pensions. There is more detail about the report here. The report is guidance for the courts on how to deal with pensions on divorce. The report notes at part 4.3 “the courts can resort to any assets, whenever acquired, in order to ensure that the parties’ needs are appropriately met”. Part 12 states “in needs cases, where the assets do not exceed the parties’ needs, apportionment is rarely appropriate”.
In short, this reaffirms the longstanding legal position – that needs trumps everything else. It is a reminder to everyone that any automatic practice is wrong. As always it depends on the individual case. Ring fencing pensions maybe fair for a younger couple who have the chance to rebuild pension contribution or generate other income, but it would be unfair for a couple who are already in retirement. Recent case law addresses this point including KM-v-CV (2020) and RH-v-SV (2020). The old case law often used to justify ignoring pre relationship pension (H v H from 1993) looks shaky, particularly because it was decided before pension sharing orders even existed.
It can be a difficult argument to run because many judges are used to applying the standard approach – but this is wrong. It needs to be considered carefully in each case. It may still be the right outcome, but not always.