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The treatment of pensions on divorce: where are we now?

View profile for Jonathan Whettingsteel
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The treatment of pensions on divorce: where are we now?

The division of pensions during divorce proceedings can be a complicated and emotive topics for many.

In order to offer clarifications and recommendations on the matter, the Pension Advisory Group (PAG) filed their ‘A Guide to the Treatment of Pensions on Divorce’ report in July 2019.

It has, however, only been recently that three cases have given clearer guidance on the division of pensions as well as recommendations contained within the report.

Case Study 1: W v H (divorce financial remedies) [2020] EWFC B10

His Honour Judge (HHJ) Hess gave Judgement in W v H (divorce financial remedies) [2020] EWFC B10,  the first reported case addressing pension divisions following the publication of the Pension Advisory Group’s report.

HHJ Hess was the co-chair of the PAG so it is no surprise that he endorsed the recommendations in the report, but it’s also helpful that he provided further guidance on this subject.

The details of the case are not of major significance but, in short, the husband held two pensions: one a defined benefit plan valued at £2,155,475 and the other a defined contribution plan valued at £58,653. The wife also held two pensions: a defined benefit plan with a value of £138,939 and the other a defined contribution plan valued at £13,798. The parties had agreed the value of the Former Matrimonial Home at £730,000, and £241,782 after payment of the mortgage outstanding.

The issues the Judge needed to consider were:

  1. Whether pensions should be divided to produce equalisation of capital or income;
  2. Whether the court should disregard pensions accumulated prior to marriage;
  3. Should the court use ‘offsetting’, giving the wife a larger share of the matrimonial home against her share in the Husband’s pensions and, if so, the value of this share.
Equality of capital or income?

It is not necessarily the case that equalising the capital will produce an equal capital income upon divorce, as this can be impacting upon by a number of variables. For example, the party’s ages, the type of pension held or any other pensions held by the parties.

There can be a substantial difference in the amount of pension that will be transferred depending upon whether there is equalisation of capital or income.

In this case, HHJ Hess determined that pensions should be divided to create equalisation of income at retirement. In giving his judgement, HHJ Hess acknowledged there was no ‘one size fits all’ solution and there were undoubtedly situations where an equalisation of capital would be appropriate. For instance, where the pensions represented a small part of the matrimonial assets or where parties were relatively young and had time to accumulate further pension funds. However, he did note that there were more situations where equalisation of income should be the desired outcome.

HHJ Hess quoted the PAG report in paragraph 60 of his judgement, stating:

“…given that the object of the pension fund was usually to provide income in retirement, it would often be fair (where the pension asset was accrued during the marriage) to implement a pension share that provided equal incomes from that pension asset, particularly where the parties were closer to retirement…”

He continued by further quoting the report:

“a division that paid little or no attention to income-yield might have the effect of reducing the standard of living of the less well-off party significantly.”

It was therefore ordered that any pension share should be to create equal incomes upon retirement.

Pensions Accumulated Prior to the Marriage

The Judge found that in cases where the parties’ needs were appropriately met (sharing cases), the exclusion of the pre-marital portion of the pension may be a “legitimate exercise in principle but noted the court would retain discretion as to what portion should be excluded.

He continued by noting that there had been an “established practice”’ of using the straight line method (the total value divided by the number of years contributions, then multiplied by the number of years of contributions before marriage) to calculate the pre-acquired value. HHJ Hess warned of the risks of using this approach in potentially creating unfairness, giving a mathematical illustration in paragraph 61 of his judgement.

The Judge determined that in ‘needs cases’ such as this one – where pensions represented the sole or main mechanism for meeting post-retirement income needs and where this income would not produce a surplus above the party’s needs – it was difficult to see justification for excluding any portion of the pension. He therefore ordered that the entirety of the husband’s pension, including the pre-acquired portion, should be subject to division.

Offsetting Against Capital Assets

Having now established the value of the wife’s interest in the husband’s pension, the Judge now needed to consider whether the wife should receive a larger share of the capital assets, instead of a share of the husband’s pension.

Further quoting the PAG Report and its recommendations, HHJ Hess noted there was an orthodox view that pension assets should be treated separately from capital assets.

Caution was again raised that when balancing pension interests with capital assets. This should not be a pound for pound balancing act as this is likely to create unfairness. This is mainly due to the fact that pensions are required to produce an income in retirement, not provide a capital and liquid asset now.

Considering this and the PAG Report’s recommendation, which encouraged each asset class be dealt in isolation to avoid offsetting, the Judge did not agree with the wife’s proposal, that she receive all of the net proceeds of sale from the former matrimonial home instead of a share on the husband’s pension. It was instead ordered the net proceeds of sale should be split equally and the wife receive a share of the Husband’s pension.

Since this judgement in February 2020, there have been two further significant cases on pension division which were heard and determined by HHJ Robinson on appeal.

Case Study 2: KM v CV (Pension Apportionment: Needs) [2020] EWFC B22

The case of KM v CV related to a long marriage of some 24 years, with the parties having one adult child from the marriage. The wife, 49, worked a as police officer and the husband,59, did not work due to a number of mental health difficulties with his income solely from state benefits.

When the parties separated in 2011, the wife’s pension had a CEV of £43,000. However, by December 2017, this had grown to £131,544. The wife’s position was that the figure at the point of separation should be the value for division, with the value accumulated afterwards being protected and retained by her in its entirety. The husband was in occupation of the former matrimonial home, and had since accrued mortgage arrears.

In the first instance, the Judge held that the correct date of the pension was the value at the point of separation in 2011 and an equal division would give the husband £21,500 from the wife’s pension. The Judge further held the husband had caused the mortgage arrears and these arrears extinguished his share of the wife’s pension, and so no pension share should be made.

Assessing ‘needs cases’

The husband appealed this, suggesting the up-to-date pension CEV should be used and that the wife’s pension was a matrimonial asset because it was in existence when the parties married. The appeal was also based on the grounds that the Judge’s approach in disregarding the wife’s pension accumulated since 2011 may apply in high value cases (where there are sufficient other resources to meet the party’s needs) but this was a ‘needs case’ and he would be unable to provide for himself or meet his needs in retirement if the entirety of the wife’s pension was not taken into account.

The appeal Judge took the same approach as HHJ Hess in W v H, allowing the husband’s appeal on the grounds that the relevant date for the pension valuation should be the date of trial, not the date of separation. He also agreed with the husband’s position, that this was a ‘needs case’ and the Judge in first instance had erred by focusing on non-matrimonial accrual over needs.

Case Study 3: RH v SV (Pension Apportionment: Reasons) [2020] EWFC B23

In RH v SV, the Judge had the benefit of a pension report providing a number of calculations on pension divisions.

This case related to a 13-year marriage for a husband, 58, and wife, 53. The parties had one child from the marriage, whom was under 18 and still financially dependent. The wife had not worked for 15 years but continued to hold a practising certificate as a solicitor. The husband’s income was £6,235 net per month.

The assets of the marriage were:

  • The former matrimonial home, valued at £410,000 and mortgage free. The wife and child of the marriage resided in the property;
  • The husband’s new property, with equity of £26,550;
  • The husband’s savings of approximately £80,000;
  • The husband’s pension with a value of £1,462,290.

The Judge in the first instance ordered:

  • The wife retain the former matrimonial home, with the husband having a charge for £102,500 (25%) payable on the wife’s remarriage, cohabitation, or the party’s child attaining 21 years of age;
  • The husband to pay monthly periodical payments of £1,500 (less child maintenance obligations) until August 2020 and nominal periodical payments until 1st July 2021, with a Section 28(1A) bar preventing an application for variation by the wife;
  • A pension share for 25.8% of the husband’s pension.

The pension share figure was based on achieving equality of capital between July 2003 – November 2008, this being the period of cohabitation.

This was appealed by the wife on the grounds the pension would not meet her needs, and whether the Section 28(1A) bar should come in to force whilst the party’s child was still at school.

The wife argued the order was unfair, as this would reduce her standard of living, as well as providing her with a substantially lower income than the husband. This would also provide the husband with 65.1% of the total matrimonial assets, and the Wife 34.9%.

The wife’s appeal was refused. The appeal Judge found that although the Judge could have ordered the bar to not come into force until the child finished school, the Judge had used his discretion and determined that the wife was educated and capable of securing her own income within the specified term.

The appeal Judge, HHJ Robinson sided with the husband’s argument,  quoting the PAG Report:

As a general rule, courts assume that the contribution based arguments are of less weight when needs take precedence, and assets which are strictly non-matrimonial can be taken into account.

HHJ Robinson found the Judge’s decision was not wrong or unjust, and the Judge was entitled to reach this decision based on the evidence provided. He did, however, reiterate that where needs dictated, the entire pension asset could be taken into consideration, not just the figure accrued during the marriage/cohabitation.

He also found that it was not inherently wrong to aggregate the value of capital and pension assets, although the report does recommend this should be approached with caution.


Although they don’t dramatically overhaul or change existing precedents, these cases have provided useful clarification on the interpretation of the PAG Report. They can be cited as helpful precedents when trying to convince a Judge of the following arguments:

  • When looking at pension divisions, the court should seek to equalise income rather than capital values.
  • The relevant date for pension calculations is the date of trial, and not the date of separation.
  • Pension values accumulated outside of the marriage will only be ring-fenced where the parties’ needs are already met. Where required to meet needs, the entirety of pension assets can be taken into consideration and divided.
  • The contribution of the parties will only be considered where needs are appropriately met from the matrimonial assets.
  • Where possible, capital and pension assets should be treated and divided separately. This is providing that it’s recognised that these are different types of assets and it is not suggested these should be matched on a pound for pound basis, offsetting can still be applied.

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