Pensions are complicated structures and most people could be forgiven for not understanding how they operate, let alone the implications for pensions in a divorce.
A pension is a "matrimonial asset". Matrimonial assets in Scotland are valued at the date of the couple’s separation.
Once all the assets are valued, the total net value of the assets are shared fairly. In most cases a "fair" share is an equal share, but sometimes there can be "special circumstances" that justify an unequal sharing of the net value of the assets.
It should be an easy thing to value the assets but with a pension, as we have seen from the McDonald case, it can result in hugely different valuations being produced by the wife and the husband.
What the Supreme Court judges have done is give clarity to family lawyers on how the legislation should be interpreted and how any apportionment of the pension should be calculated.
If the pension fund is still receiving contributions at the time the couple separate, the Supreme Court decision makes no difference to how the calculation was carried out prior to this decision.
Where it does make a difference is where at some point in the marriage the pension fund stopped receiving contributions. This might occur when, for example, the spouse retires or when the spouse leaves his or her employment.
Anyone currently going through a separation where a pension is one of the assets should make sure that their solicitor is aware of the Supreme Court decision and should question whether any pension valuations need to be recalculated.
For one of our clients when we carried out the recalculation, it increased the value of the husband’s pension that is to be treated as a matrimonial asset by approximately £100,000.
This doesn’t necessarily mean that the wife’s share of the assets will increase by £50,000 as the husband may have an argument that in applying the "fairness" principle the assets should not be divided equally, but it does increase the value of the assets that are available to be shared.
For anyone who has already signed a separation agreement or a court order has been made dividing the matrimonial assets, the Supreme Court decision won’t enable you to ask for this to be reviewed. Your agreement or the court order would have been made based on the interpretation of the regulations that stood at that time.
Denise Laverty, Associate at BTO Solicitors
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