It is now difficult to recall, but until December 2000 the court did not have power to share pensions on divorce. That is not to say that pensions were not previously taken into account in divorce settlements, but the ways in which they could be taken into account were limited. The most common method was offsetting, whereby the party that did not have the pension received more of the other assets, to offset the pension. This, however, had its drawbacks, as we shall see.
After pension sharing orders were brought in, practitioners were eager for some guidance as to their use. Accordingly, when a case concerning pensions went to the Court of Appeal in 2006, it was hoped that that guidance would be forthcoming.
That case was Martin-Dye v Martin-Dye. It concerned a couple who were married in 1987. Between them they brought assets of about £1.67 million into the marriage, of which the husband had contributed about 18 per cent and the wife about 82 per cent. The marriage broke down and divorce proceedings were issued in 2003. Both parties applied to the court for a financial settlement.
When the applications were heard by the district judge, the value of the assets had risen to £6.3 million, including the husband’s pension, which was valued at £940,000, and the wife’s pension, which was valued at £100,000. Both pensions were already in payment.
The district judge concluded that a fair division of the assets would be 57 per cent to the wife and 43 per cent to the husband, to reflect the fact that the wife had brought considerably more into the marriage. The total of the assets were therefore divided in those proportions, with the wife’s share including the value of her pension, and the husband’s share including the value of his pension.
The husband appealed against this order. It was argued on his behalf that the pension should not have been treated as capital, but rather as an income stream. This argument was initially rejected by the court, and the appeal was dismissed. The husband appealed again, to the Court of Appeal.
The Court of Appeal agreed with the husband. A pension in payment was not the same as other assets. It can’t, for example, be sold, commuted for cash or offered as security for borrowings. It should not therefore just be treated as capital and doing so had been unfair to the husband, who had been left with a major part of his share of the property in the form of a pension in payment, rather than other property.
Instead, the pensions should be apportioned by means of a pension sharing order. Since neither party had challenged the district judge’s decision to divide the assets 57 per cent to the wife and 43 per cent to the husband, the Court of Appeal stuck with those proportions. Accordingly, there was to be a pension sharing order which would give the wife 57 per cent of the total value of the two pension rights. The remaining property would be shared as to 57 per cent to the wife and 43 per cent to the husband.
The husband’s appeal was therefore allowed and the original order was replaced with an order in those terms.
Martin-Dye was an important case, but the Court of Appeal’s judgment only really provided guidance as to the approach to be taken to pensions that were already in payment. In many cases, of course, the pension is not yet in payment – practitioners would have to wait for guidance regarding them.
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