A recent case ruled upon by HHJ Hess, has provided guidance as to what extent a husband’s pension was matrimonial property and to what extent non-matrimonial property, i.e. was it open to be shared with the wife equally or not in the divorce.
The judgment refers to the recent Supreme Court case of Standish, reaffirming that it is important to recognise there is a conceptual distinction between matrimonial and non-matrimonial property and that the distinction turns on the source of the asset.
HHJ Hess explains that the rights in a pension, unlike cash or property, rarely become ‘mingled’ during a marriage. This is because unless pensions are drawn down, they will remain in a pot, in the sole name of the person who is earning the pensions until retirement, remaining unmixed and a source of future income.
The husband argued that because the pension funds had not been touched, they did not meet the test in Standish because funds had not yet been converted into ‘actual use and enjoyment’. HHJ Hess recognised that while actual use and enjoyment provides a clear example, a common intention to put an asset into use and enjoyment in the future could also give rise to matrimonialisation, ‘if that intention was relied upon by the other part to his or her detriment’.
The wife argued that a 2013 conversation, during which the husband said something to the effect of “we will share everything equally,” after she agreed to use a £1,500,000 gift from her father to buy a property in their joint names, should be given significant weight. However, HHJ Hess also acknowledged the husband’s substantial contributions to the marriage and did not accept that argument, determining that more would be required to meet the Standish test, the conversation was not necessarily or specifically about pensions.
The Judge concluded that it was fair to consider 55% of the husband’s pensions as having accrued during the marriage (matrimonial) and 45% as having accrued outside the marriage (non-matrimonial).
What does this mean for your divorce settlement? Have you had any specific conversations with your spouse about the future and specifically the use of their pension or other assets held in their name? Have you discussed jetting off on an around the world trip or moving to another country, utilising the other’s pension in retirement to do so? The judge seems to be saying that if you can show that the discussion you relied on actually took place, you stand a much stronger chance of securing a share of the pension – which, in simple terms, leaves you better off if it isn’t your own pension.
Even if you are happily married, is it worth having this conversation and clearly recording it? We seem (possibly unfortunately) to be moving to a system where the conscious or more often unconscious actions taken in a marriage, as to how assets are held, can have significant financial consequences on separation. If you bring less to the marriage financially, it is worth considering how best to deal with this fairly, as the non-financial sacrifices often made appear at risk in certain cases of being forgotten if things fall apart.
The judgment raises some very interesting questions. The family team at Clarke Willmott are here to help.
‘We seem (possibly unfortunately) to be moving to a system where the conscious or more often unconscious actions taken in a marriage as to how assets are held can have significant financial consequences on separation’ Gareth Schofield, Clarke Willmott LLP