Pension sharing is now part of the court's armoury in respect of petitions filed on or after 1 December 2000, and the profession and the courts will soon have to get down to considering in detail how to apply the new provisions in the context of the overall picture.
What should the mental process of the court (and, therefore, the advocate) be?Start with two presumptions.
First, the court will have all the information about the pension entitlements of both parties, the solicitors having complied with the provisions as to information contained in the amended Family Proceedings Rules 1991.
Second, assume that pensions are relevant to the instant case; it is always possible that the court will consider how the order it should make should be affected by the pensions position and answer 'not at all' -- see T v T (Financial Relief: Pensions) [1998] 1 FLR 107.First option: offsettingGiven that pensions are going to have some effect on the outcome, what are the options? It is generally accepted that pensions may affect the final order in one of three ways.
The first of these is offsetting.
Here, the court takes the value of the pension entitlements of one or both of the parties into account when making its final order but does not make an order for attachment or pension sharing.
Instead, there is a lump sum order or property adjustment order in favour of the party who does not enjoy the pension entitlements which is 'loaded' to take account of the pension entitlements in which he or she is no longer going to share.Second option: attachmentThe second method is attachment (formerly known as 'earmarking').
Here, the persons responsible for the pension arrangement are ordered to pay to the non-member a lump sum or periodic sums which, had it not been for the order, would have been paid to the member or, in the case of death in service benefits, the member's estate.
These payments will normally be made at some date in the future and not immediately.
This order may be linked with an order to commute at a certain date.Third option: sharingThe third option is pension sharing.
Part of the pension arrangement member's pension entitlement is lopped off and transferred to the other party so that he or she now has his or her independent pension.And just one otherFor the sake of completeness, one should perhaps add a fourth possibility which would only apply when an ongoing periodical payments order was made.
Here, the court would take the view that it is unnecessary to make any order as to pensions at the present time since the applicant would be protected as to income for the time being and the pension position would be better considered nearer retirement.Equality cuts both waysIn most cases, there are not unlimited funds and parties and their advisers must address the question of what is most important for them.
For the purposes of this article, let's assume that the wife is the applicant and has no pension entitlement, so that the assets in issue are the jointly owned home, savings and life policies and the husband's pension entitlements.
Put crudely, the wife cannot expect to get everything.
One of the effects of White v White [2000] 3 WLR 1571 may be that the yardstick of equality cuts both ways and while in many cases it may not be difficult to justify a disproportionate distribution of capital in favour of a wife with dependent children, fairness requires that the husband is left with some share of the assets.
Where there are sufficient funds to meet the reasonable needs of both parties, the yardstick of equality is more compelling.So it is suggested that most ancillary relief applications still have to be determined on the basis of need.
The primary needs of both parties are usually for housing and income and those will be the first matters to be addressed.
Readers will not need to be reminded that the housing needs of the party with care of children have priority over those of the other party, though if it is possible to rehouse both parties at a reduced standard of housing that option will normally be adopted.
Both parties have to have income on which to live, and, again, the party with care of children will normally require a contribution from the other to assist with child support.
So far, so trite.
The financial adjustments already described normally exhaust the resources of the parties and there is little left to argue over.Death in service benefitsWhere they are of relevance, pensions may be considered in a variety of ways.
First, a party with dependent children who is receiving any form of financial support for them, whether from the Child Support Agency or by agreement, will be concerned with what is to happen if the breadwinner dies.
She will therefore want the husband's death in service benefits to be attached, and solicitors who fail to attend to this (or at least to explain all the implications to their client), will be negligent.
There may of course be a good reason why death benefits should not be attached, more on that later.Another day?Secondly, a spouse who is dependent on periodical payments from the other party will, in addition to needing attachment of death in service benefits, need to consider what is to happen when the other party retires.
How is post-retirement income to be assured? This can now be done in one of two ways, namely pension sharing or attachment.
Alternatively, the issue can be left to be determined nearer the time of retirement.
There cannot be both attachment and pension sharing in respect of the same pension arrangement (this applies to death in service benefits also).
Briefly, the advantage of doing nothing now and postponing the issue is that the needs of the parties and the amount of money available from the pension will be clearer nearer the time of retirement.
As Mr Justice Singer pointed out in T v T, the one thing certain in that case was that the assumptions on which any deferred order might be made would be proved to be wrong.
That may well almost always be the case when attachment is being considered, except where the paying party is near retirement, and, of course, attachment has other disadvantages such as the fact that the order can be varied, would not survive the death or insolvency of the paying party, and would maintain a link between the parties which is inconsistent with a clean break.Certainty and finalityThe same arguments may not always apply to pension sharing.
Whether or not there is a continuing order for periodical payments, the applicant will need to consider pension sharing where her own pension arrangements are inadequate.
Pension sharing does not suffer from the disadvantages set out above, and has the advantage of certainty and finality.
It would be appropriate where the respondent had a fairly substantial pension arrangement and the applicant had inadequate provision.Finally, the position of the applicant whose need is for capital which is not currently available must be considered.
It may be that a respondent who is without capital now will be due to receive a lump sum on retirement.
This would be a good reason for attaching the lump sum to pay a capital sum to the applicant.Expert adviceTherefore, in every case, the needs of the individual client must be considered and a bespoke solution achieved for him or her.
Some form of expert advice will often be required, if only from a financial adviser at little or no fee.
Lack of space prevents additional investigation of this topic but one point is worth pondering.
If a woman secures 50% of her husband's pension, even if it is payable immediately, she will not recover exactly the same pension as he because of different actuarial calculations as to life expectancy, etcetera.
Advice on these issues seems to be imperative.
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