In your first blog on this matter you had mentioned that His Honour Judge Hess had stated in his Judgement there were three important issues on Pensions that must be explored. The first equality of income or capital was dealt with in your first blog. The second issue is the relevance of contributions to a Pension Fund pre marriage/ pre cohabitation if continuous before marriage. Can you comment on this further please?
Yes. The relevance of pre marriage/ cohabitation contributions is an interesting issue covered in the Guide. If such contributions are to be excluded the second question is how such contributions can be calculated. In W v H it was argued by those acting for H that the straight-line method was the one to use. This would be the years prior divided by total years of contribution multiplied by the Pension Benefit. His Honour thought in this case such an outcome would be unfair.
He recognised the distinction between a needs-based case- where the assets are only just adequate to meet needs and sharing cases where there is more than enough for both parties. In the former-the majority- needs are likely to override contribution issues such as here paying into a pension before marriage/ cohabitation. This distinction is recognised in the Nuffield Guide.
In this matter because of W’s needs he thought that the pre-marital contribution should not be disregarded.
What about the straight-line method-that is that years of contribution are calculated equally when assessing Pension Benefit if pre-marital/ cohabitation years are disregarded?
He was critical of this method in the case- as here – of a Defined Benefit Scheme. He pointed out that in the early years of employment the Pension Holder would be in a junior capacity and earning less. The majority of contributions in a final salary scheme would be in the last years of employment.
He suggested a CE calculation might have been better. In this case the PODE had not been invited to provide one.
This then comes on to the third issue that of offsetting. How is this dealt with in the Judgement?
Before we comment further just a reminder of what offsetting is. It means that a Pension claimant will not seek an interest in the Pension Scheme itself. Instead the claimant will ask for a greater amount in some other asset- normally the former matrimonial home. The suggestion in this case was that this should happen.
What was the Judges view of offsetting in this matter?
He was critical and gave the following reasons. He quoted Thorpe LJ in Martin-Dye v Martin-Dye 2006 2FLR 901. In that case the Judge had thought it right that Pensions be dealt with separately to other asset classes and particularly having regard to their income producing qualities. The Nuffield Pensions Advice Guidance(2019) p35 was of a similar view.
Essentially it states that parties should try to avoid offsetting if they can. Pensions should be dealt with by a PSO(Pension Sharing Order). Other assets by a lump sum/ capital payment and/or property adjustment order( in respect of actual property).
However, in his Judgment the Judge went on to say that many litigants will use offsetting. He pointed out the very real difficulties in valuation. He also refers to the fact that one party may have realisable assets and the other none realisable assets.
So how in the end on a capital basis was the case decided?
There be a Pension Sharing Order in respect of H’s Pensions. No deduction for pre marriage/ cohabitation contributions since this was a needs case. The equity in the former matrimonial home be divided equally. No offsetting.
The post Blog 2 – A Case on Pensions – W v H 2020 EWFC B10 appeared first on Campions Solicitors.