KNOWLEDGE

Pension sharing in Scotland vs. England

Morton Fraser Partner Fiona Sasan
Author
Fiona Sasan
Partner
Morton Fraser Senior Solicitor Anna Mailtles
Author
Anna Maitles
Senior Solicitor
PUBLISHED:
29 November 2021
Audience:
Individuals and Families
category:
Article

Articles written by our English counterparts always cause us to carry out a mental analysis of how scenarios would be determined in Scotland.

We recently read an article about an unsuccessful attempt to vary a pension sharing order in a recent English case called T v T which caused us to do just that, and we thought it might be useful to work through the scenario and what would have happened in Scotland. The different outcomes capture the key difference between the two systems and highlight, once more, an area where the law in Scotland provides for certainty and the English system doesn’t. The converse of this is, of course, that the Scottish system can be seen to be a rather inflexible and sometimes unfair one. It can be argued that divorce and family law is an area where provision should be more holistically applied to ensure women receive adequate financial provision tailored to what is fair in their particular circumstances.  As we set out below, the outcome of the English case of T v T resulted in the wife being able to share in the increased value of the husband's pension a number of years after separation occurred.  Spoiler alert…. had she been in Scotland things wouldn’t have ended as well for her.

In England, the law provides that a couple divorce first and then divide their assets later. In the case of T v T, Decree Nisi was granted in 2013 following the couple's separation.  Decree Nisi is the first order by which the court states the marriage is going to end unless there is good reason not to grant it. Decree Absolute awaited the outcome of financial remedy proceedings. These proceedings took place in 2015. At those proceedings a pension share was awardee that saw with the wife receiving 40% of the husband's pension which had a value of £826,125 at the point the parties separated.

Decree Absolute was not sought until December 2017 and an application to vary the pension share was made a month before it was pronounced on the basis that the application of a percentage would result in the wife receiving 40 % of the increased pot of £2,471,833.

By the time the application for variation was considered by the court, the Judge found that the change in value would not merit any variation because:

  1. The husband was largely responsible for the delay in implementation;
  2. The rise in value was attributed to market changes and not contributions; and
  3. Reducing the value of the pension share to the 2015 value at the date of the award would purchase the ex-wife a substantially lower pension benefit than had been contemplated simply by the passage of time.

The husband's application was dismissed, and the percentage award was left intact, the result being that the wife received a far greater sum than she would have done had Decree Absolute been granted at an earlier date.

In Scotland, sharing of pension values is pegged to the date you cease to live as husband and wife but only capable of being implemented (i.e. shared) on and after Decree of divorce is granted. That’s because the statutory basis for being able to share a pension is an invention of the UK government who operate with the English system in mind. Divorce can sometimes take years to achieve, and a recalcitrant spouse can force their other half to go to court at great expense to seek an order for sharing of the pension within divorce proceedings. Years can pass from the date of separation without the spouse being able to share in the pension growth which remains pegged to separation date value. Knowing this, Scottish practitioners generally share pensions according to specific sums of capital to be debited from the transferor to the transferee's scheme and percentages are rarely ever used simply because it leaves a calculation to be done which can be done at the time of any negotiation or order and provide certainty of the value of the pension share. 

The prospect of a Scottish spouse ever achieving a windfall in a rising pension market is pretty much nil. This leaves us pondering whether beneficiaries of pension shares in Scotland are potentially losing out. Is this a scenario where we should be using our ability to apply judicial interest to an award more readily - backdating it to the date proceedings are raised so as to compensate against the loss occasioned by a challenging spouse? Perhaps pensions sharing in Scotland is an area of the law where it is time to get creative. Of course, it comes down to who you are acting for and the facts and circumstances of each case. There is also the issue of judicial buy in. While it's unlikely we will ever see an outcome where the party receiving the share finds that pot of gold at the end of the rainbow maybe there is scope for a few extra golden coins to compensate in cases where there is an obstructive spouse.

Disclaimer

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers.  Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.