The Mini-Budget Economic Crisis – What Does This Mean for Financial Remedy Applications?
Published: 30/09/2022 10:34
We have all read the news and seen the market’s reaction to the so-called “mini-budget.” The Bank of England, according to many political commentators (this is by no means a political blog!) have effectively bailed out pension funds by setting aside £65bn to buy bonds over the next week or so to ease pressure on pension funds and insurance companies. The press has highlighted the hike in interest rates which in turn impacts borrowing and mortgages in particular. Already this week we have heard that lenders may be more reluctant to loan based on the deals they had recently advertised, and have been “pulling deals”. The pound we know is struggling in international markets and it is apparent for all to see there is a current financial crisis. On top of all of this – the housing market is predicted to slump by 10%, having slowed in recent weeks.
So, what does this mean for people who have just settled their financial remedy claims, and what does it mean for those currently being processed by the system? Well, we aren’t strangers to unexpected economic difficulties – we had the crisis of 2008 and the unpredicted, unprecedented impact caused by the global pandemic. Those past events help us to look at how the courts will view financial remedy applications at this time.
In respect of matters which have just settled, it is very doubtful indeed, looking at decisions made over the past two years (and beyond), that the court will consider the current economic instability as a Barder event.1 A helpful recent case exploring the Barder principles in the context of the economic impact of the pandemic, is BT v CU  EWFC 87 which was summarised by Polly Morgan over on the FRJ website and can be found here. Cases where there have been financial implications due to economic crashes/financial events – even those unforeseen (such as the pandemic) are unlikely to be enough for the court to set aside an Order. Of course, any application is fact specific and advice should be taken but warning should be heeded that an application based on changing financial circumstances due to the economy is unlikely to set aside an Order made by the court.
So, what do you do if your application is already in the system or waiting to go? What happens if you are having a pension report prepared? Each case is of course fact specific and nothing said in this blog is designed to be legal advice. Nothing is ever guaranteed within financial remedy proceedings – this is the advice we give on a daily basis. Ultimately the court has to work with the figures and information it has at the time a case is being decided or settled.
From a practitioner’s perspective it is important to build in the risks to the best of your abilities and urging perhaps a more cautious approach. If you have instructed a PODE report – or have just had one finalised – ask a question(s) of your expert (but bear with them at this time!).
With regards to mortgage raising capacity, take a pragmatic view – ask your broker if their advice has changed, check out products online – for many people going through this process they will not be first time buyers, which may put them in a less precarious position.
The majority of the cases going through the court system are based on needs If you have a case whereby someone is being stretched to their financial limit then the current situation will need to be considered – is the new house they want to purchase realistic? Is it better to have a short-term Mesher Order, if possible instead? Consider the specific facts of your case and whether there is room to allow for some caution. Remember, we are not giving financial advice, and instruct an IFA who knows their stuff and are used to advising in volatile economic climates.
Financial markets change, and the court is not able to predict the future. In any case, for example, where there is a pension sharing report – one only has to look at the cautionary remarks within them that note that pensions are subject to change, the information within the report is to the best of the actuary’s knowledge at the time they complete the report, and by the time a pension share has been implemented things could have changed – this is important information in “normal times” but particularly relevant in these unsettling times.
Is the court going to grant adjournments on every financial remedy application which comes through its doors? No, absolutely not. Will there be some cases where this may be appropriate – yes there will be, but note, that the court cannot adjourn an application to some unspecified time in the future when the country’s finances are more settled – there continue to be no guarantees as to when that might be.