Pensions in the context of separation and divorce

pensionLast year, the Supreme Court (the highest Court of Appeal in the UK) made a landmark decision in the case of McDonald v McDonald relating to the question of pensions on divorce. Pensions can form substantial assets for these purposes. A question arose as to how much of Mr McDonald’s pension should be taken into account when calculating the assets to be divided on divorce.
The law sets out the formula to calculate the proportion of any pensions which should be taken into account. The regulations (regulation 4 of the Divorce etc (Pensions) (Scotland) Regulations 2000) provide the relevant formula. The formula is A x B ÷ C. A is the value of the pension at the relevant date (normally the date of separation), C is the length of time the individual was in the pension scheme before the relevant date and B is the amount of time C which falls within the marriage itself before the relevant date.
The difficulty in the above case arose with regard to the definition of the period of membership. It had previously been thought that would relate only to being an active (generally speaking a contributing) member rather than the whole period of membership whether contributing, not contributing or receiving the pension.
Mr McDonald joined his British Coal pension scheme in December 1978. He married his wife in March 1985. He took early retirement on the ground of ill-health and started receiving his pension in August 1985, a few months after marriage. In 2010 when the parties separated Mr McDonald argued the value of his pension rights should be restricted to the period during which he was an active member of the scheme, and this would amount to £10,002. Mrs McDonald argued the whole period of her husband’s membership of the scheme, both contributing and receiving, should be taken into account, which meant the value to be included would be £138,534.
The Supreme Court agreed with Mrs McDonald, deciding the period of membership should not be restricted to active membership but should include the entire period of membership.
This is not however the end of the road for anyone attempting to exclude the portion of their pension which does not relate to the time that they were contributing during their marriage. The Family Law (Scotland) Act 1985 allows for some flexibility under Section 10(1). This provides there may be special circumstances which allow that scenario to be taken into account and it remains possible to attempt to persuade the Court that a certain portion of a pension be excluded.
However, this case does bring about a significant change in the way pensions on divorce will be dealt with. This is a complicated area and legal advice should be obtained.
If you wish to discuss any matter raised in this article, please contact Senior Court Solicitor, Susan Waters, by telephone on 01224 581581 or by email at s.waters@jgcollie.co.uk

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