Introduction
The
core legislation the court must have regard for
during cases of UK divorce is the Matrimonial Causes
Act 1973 (MCA 73) and over time this Act has been
added to in order to help courts achieve a clean
break for the parties. During ancillary
relief proceedings rules require three stages
to resolve the matrimonial assets, being the first
appointment, financial dispute resolution (FDR)
and the final hearing.
During this process shown by
the step-by-step
guide in detail, the court can have regard to
other rules to ensure the parties are on an equal
footing when considering the financial matters and
when expert evidence is required, the power to instruct
the parties to appoint a single pensions
expert.
Significant changes to pensions on divorce were
introduced by the Welfare Reform and Pensions Act
1999 (WRPA 99) where pension
sharing will allow the members pension rights
to be divided between the parties. Further changes
to the way divorce can be initiated will be introduced by the Family
Law Act 1996 (FLA 96), although the government has
postponed the implementation of this Act for the
time being.
Matrimonial Causes Act 1973
For a couple involved in proceedings for divorce or nullity
of marriage or judicial separation the relevant principles
are set out in section 25 of the Matrimonial Causes Act 1973
that allows the powers
of the court to resolve the matrimonial assets and financial
matters including the value of retirement benefits of any
pension arrangements held between the parties. The courts
are directed to have regard to achieving a clean break between
the parties as well as to have regard to all circumstances
of the case including the following matters:
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The income, earning capacity, property
and other financial resources which each of the parties
to the marriage has or is likely to have in the foreseeable
future including; |
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The financial needs, obligations and
responsibilities which each of the parties to the marriage
has or is likely to have in the foreseeable future; |
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The standard of living enjoyed by the
family before the breakdown of the marriage; |
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The age of each party to the marriage
and the duration of the marriage; |
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Any physical or mental disability of
either of the parties to the marriage; |
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The contributions made by each of the
parties to the welfare of the family, including any contribution
made by looking after the home or caring for the family; |
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The value to either of the parties
to the marriage of any benefit (this can include pension
arrangements) that (as a result of the divorce) the party
will lose the chance of acquiring. |
Where there are children of the marriage
the court are concerned with the arrangements
for children and will want to ensure the parties maintain
their obligation and responsibilities until the children cease
to be dependent. This may mean that it is not possible to
achieve a clean break, as there may be a need for continued
maintenance. The MCA 73 has been amended to reflect the need
of the former spouse to secure members pension rights on divorce.
Section 166 of the Pensions
Act 1995 introduced earmarking and inserted sections 25B
to 25D of the MCA 73.
The MCA 73 has been further amended by sections 19 and 21
of the Welfare Reform and Pensions Act 1999 (WRPA 99) that
introduced pension sharing as well as making some improvements
to earmarking.
Although the Matrimonial Causes Act 1973 contains the primary
pension sharing legislation the detailed working of pension
sharing can be found in subordinate legislation and implemented
through statutory instruments.
Welfare Reform and Pensions Act 1999
It is usual for a couple on divorce with retirement benefits
to use offsetting against other matrimonial property as a
resolution. Attempts to allow the former spouse part of the
members pension rights were introduced in England and Wales
by section 166 of the Pensions Act 1995 with earmarking and
section 16 of the Family Law Act 1996 (FLA 96) with pension
splitting.
Both these steps were unsatisfactory in
achieving a clean break so the Welfare Reform and Pensions
Act 1999 (WRPA)
introduced the solution of pension sharing, receiving Royal
Assent on 11 November 1999 and applying to a divorce petition
and nullity of marriage from 1
December 2000. The WRPA 99 amends earmarking legislation
introduced by section 166 of the Pensions Act 1995 by requiring
the court to apply the earmarking order as a percentage to
the retirement benefits. Part III contains the new pension
sharing framework that amends existing family law, specifically
section 19 amends the MCA 73 and allows the court in England
and Wales to make a pension
sharing order.
Section 21 amends the MCA 73 section 25B
to 25D to allow a pension sharing order attachment of a specified
pension arrangement or state
scheme rights. Part IV deals with how pension sharing
is effected and the result in relation to the pension arrangement
and state earnings related pension scheme (SERPS).
Finally, the WRPA 99 repealed section 16 of the FLA 96 that
introduced the concept of pension
splitting.
The Welfare Reform and Pensions Act 1999
has left the majority of the detailed working of pension sharing
to subordinate
legislation in the form of statutory instruments that
exist as specific regulations. Of the more important regulations,
as detailed in the step-by-step
guide, is the Pension on Divorce etc (Provision
of Information) Regulations 2000 that deals with the supply
of information requirement from a pension
arrangement as well as the valuation method of retirement
benefits. In terms of valuation, the Pension Sharing (Valuation)
Regulations 2000 will deal specifically with the calculation
of the cash equivalent transfer value (CETV).
The Divorce etc (Pensions) Regulations 2000
are concerned primarily with earmarking and the procedures
that apply to earmarking if there is subsequently a pension
transfer. This has replaced the Divorce etc (Pensions)
Regulations 1996 that, although repealed, still provide some
useful guidance for the valuation of a members pension rights
in paragraphs 14 to 16 as follows:
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Paragraph 14 states that insofar as
pension rights accrued up to the time when the court considers
financial provision on divorce are concerned, the divorcing
parties will not be permitted to use any method of valuations other than the prescribed method. It would, however, be
open to them to dispute whether the prescribed method
has been correctly applied. |
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Paragraph 15 states that the Divorce
etc (Pensions) Regulations 1996 will not prevent the parties
providing further information as to the expectation of
the pension, and will not prevent the court from taking
account of that information in circumstances where it
deems the cash valuation provides an inappropriate or
inadequate indication. |
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Paragraph 16 states that the prescribed
method cannot be used for discretionary
benefits not including in the CETV or pensions administrated
outside England and Wales. Regulations cannot, therefore,
bar other methods of valuing such pension benefits. |
The Pensions on Divorce etc (Charging) Regulations
2000 deal with the pension arrangement and its ability to
recover charges as a result of pension sharing and earmarking.
Also, the Family Proceedings (Amendment) Rules 2000 provide
a procedural code for applications related to pension sharing
and earmarking.
Family Law Act 1996
Although due to be fully in force by the year 2000 the government
announced in December 2000 that at least in part the Family
Law Act 1996 (FLA
96) would be postponed probably for several years.
Divorce in England and Wales is currently governed by the
Matrimonial Causes Act 1973 (MCA 73) where an application
for divorce can only be made if the couple have been married
for a year or more and the only ground for a divorce petition
is that the marriage has irretrievably broken down. The action of adultery, unreasonable
behaviour, desertion (after two years), two years of separation
(with consent) or five years of separation (without consent)
will prove this to the court.
The FLA 96 would bring in significant changes if introduced
fully, where Part II of the Act will allow for no fault divorce.
This means that no ground will have to be shown as to why
the marriage has irretrievably broken down with the application.
However, the new procedures for divorce would encourage mediation
and conflict resolution for divorcing couples. The Family
Law Act 1996 was passed by parliament and will be brought
into force with statutory instruments by the Lord Chancellor
in stages.
Ancillary relief rules
There are a number of rules that apply to ancillary relief
proceedings as the step-by-step
guide shows. In particular
new arrangements effective from 5 June 2000 means that these
proceedings will have fewer delays for settlement, lower costs
and greater control by the court of the conduct and proceedings.
The Family Proceedings (Amendment No.2) Rules 1999 inserts
new rules into the Family Proceedings Rules 1991 introducing
a three stage process involving the first appointment, financial
dispute resolution (FDR)
and the final
hearing.
During any stage of this process the court will expect the
parties to make offers to settle all or part of the matrimonial
assets and for the recipient to give full consideration. If
the couple cannot come to an agreement the court has the power
to make a ruling after careful consideration of the facts
of the case in the final hearing.
Also important for the division of a members
pension rights is rule 2.51B of the Family Proceedings
Rules 1991 that states that the overriding objective of the
court must be to ensure that the parties are on an equal footing
and deal with the case in ways which are proportionate to
the amount of money involved, to the complexity of the issues
and to the financial position of each party.
In all cases the court will need to be satisfied that the
extra costs associated with expert evidence are justified
whether this results in offsetting against other matrimonial assets, earmarking or pension sharing
of the retirement
benefits. Whether expert evidence is accepted during ancillary
relief proceedings will depend on the courts regard for rule
2.61C of the Family Proceedings Rules 1991. This states that
expert evidence will not be allowed (whether written or oral)
unless permission has been given by the court and the court
will only give permission if expert
evidence is reasonable required and justified and in accordance
with the overriding objective of rule 2.51B of the Family
Proceedings Rules 1991.
Where the appointment of a pensions expert is necessary but
the parties cannot agree on a single expert, the court has,
under part 35 of the Civil Procedures Rules, the power to
instruct that evidence be given by a single pensions expert.
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