Divorce and Pensions
In the case of WS v WS 2015, the Court considered how to deal with the disparity between the parties’ pension provision.
The Wife was aged 56 and the Husband was 61 years.
The parties were married for 25 years.
There were two children of the marriage, who were independent.
The parties agreed an equal division of assets and a clean break.
However, the issue was how to deal with pensions.
The parties both had substantial pension provision. However, their pensions were both different in nature and in value.
The Husband had a small money purchase plan and a defined contribution pension which was held in a self-invested personal pension. The Husband had taken 25% of his pension funds, tax free.
The Husband had funds of £970,696.00 remaining.
The Husband was able to draw further funds from this pension, but this would be subject to tax.
The Wife had a defined benefit pension scheme. The Wife had also taken 25% of her pension funds tax free.
The CEV of the Wife’s pension at Form E was £2,433,696.00, rising to £3,064.154.00 at the date of the Trial.
The Wife’s pension produced an income of £92,086.00 gross per annum (£56,000.00 net per annum).
The Wife could not withdraw money from her pension.
It was not possible for there to be a Pension Sharing Order in this case as it would have taken the Husband over his life time allowance, which would have resulted in tax consequences.
Therefore, the parties agreed the Husband should receive additional capital to reflect the difference between the parties’ pensions (i.e. to offset his interest in the Wife’s pension).
The dispute between the parties was how they should calculate the amount of additional capital the Husband should receive to offset his interest in the Wife’s pension.
The parties each put forward their proposals in respect of how it should be calculated.
The Court approved the Wife’s arguments that the Duxbury approach should be used.
The Duxbury approach is used to identify the lump sum a spouse would need to offset their interest in the other’s pension. This calculation is based on a number of variables, including life expectancy.
The Court decided the Husband should receive an additional £425,000.00.
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