When Are Pensions Too Small to Worry About?
Published: 03/11/2023 12:44
First of all, may I observe that the Family Court seems to be publishing more judgments in small money cases. I commend this approach. As a single joint expert, I was often instructed in smaller money cases, and the dearth of case law in such cases made it difficult to know, on occasions, whether we were taking the right approach.
My attention this week was drawn to this case: Jacqueline Butler v Earl Butler  EWHC 2453 (Fam).
This was a case that ended up in front of Mr Justice Moor on appeal following the order of Recorder Anderson.
The brief facts of the case were as follows:
- The husband, Mr Earl Butler, was aged 64, and the appellant, Mrs Jacqueline Butler, was aged 53. It was held that their marriage was short in duration, being for a six-year period from 2003 to 2009.
- The case was dominated by a residential property worth c. £410,000, in which H resided. This residential property was deemed to be totally non-matrimonial. There were other small investments and debts such that the net asset position of Mr and Mrs Butler was c. £400,000 – excluding pensions.
- H worked for the local authority as a caretaker earning £25,000 pa.
- W was, and remains, unable to work due to medical conditions, and receives Universal Credit of £35,000 pa.
- In addition to the assets mentioned above (net assets £400,000), it was noted that H had a BT pension in payment of £6,274 pa, and that he had probably accrued with the local authority a pension of similar size, which would be drawn in retirement.
The Recorder at first instance recognised it as a needs case, and awarded W £58,000 on a clean break basis, which H had to raise against his house. The sum of £58,000 was considered by the Recorder to be the maximum amount that H could raise by way of a mortgage against his property – a sum from which H was also to discharge debts.
W appealed on grounds that the recorder correctly identified it as a needs case, but then failed to meet her needs. Moor J rejected the appeal saying it was impossible to meet needs and that giving W more than £58,000 would have left both parties homeless.
Moor J also noted that the recorder, at first instance, ‘Declined to make a [pension sharing order] on grounds pension is small and in payment’ (emphasis added).
Mr Justice Moor also observed, ‘There is no question of sharing matrimonial property, as there is no matrimonial property.’
Mr Justice Moor dismissed the appeal of W as the order of Recorder Anderson was not wrong.
It is clearly the case that greater detail and deliberation will have occurred than is set out in the judgment, but I am left wondering about a number of points:
- Is it relevant that the BT pension is in payment? Why should that be a consideration in declining to make a pension sharing order (PSO)? One possible reason is that because it is in payment, there is no scope for the recipient of a PSO (W) to draw any tax-free cash from any resultant pension credit, and it was assessed that her needs were solely for cash. My concern is that without explanation, it may be perceived by others that a pension in payment is a bar to a pension sharing order. It is not.
- We do not know whether a cash equivalent value (CEV) for the BT pension was ever obtained. It is not unreasonable to suggest that the value of the BT pension valued on the open market may have been c. £175,000 (using a Galbraith table factor for a 64-year-old male of 27.8), although the scheme’s own CEV may have been less (or conceivably more) than this.
- It was also suggested in the judgment that H may have had a local government pension ‘probably similar to his BT pension’.
- Therefore, in a case where non-pension assets totalled c. £400,000, is it the case that pension assets of perhaps £300,000 to £350,000 were overlooked?
- Likewise, was it examined when H accrued his BT pension? Having set to one side pensions because of their size and being in payment (although as we see above their size may well have added 75% to the asset schedule) was it also the case that despite Moor J saying ‘there is no matrimonial property’ some did actually exist in the form of pensions?
(As an aside here, perhaps I may be permitted to make an observation as an outsider looking into the legal world. Sometimes to an outsider, legal phraseology can seem archaic and misleading. I understand that the term ‘matrimonial property’ includes any asset acquired or accrued within the marital period, and not just bricks and mortar. I wonder whether reference to ‘matrimonial assets’ may make the reading of judgments easier for those of us outside the law?)
Now all of these points may have been considered, and simply not reported, and it was decided W’s sole needs were housing and/or liquid capital, and that a PSO may not be of much use to her. It is also possible that pensions were discussed but it was thought that if W were to receive a PSO this would affect her means-tested benefits, and thus the result of a PSO may be no net gain to W but a loss to H. But would this also not be case with £58,000 lump sum order?
However, absent any further detail as to pensions and the deliberations that may have surrounded them, one could be left with the impression that pensions (which in the overall context of the other assets in this case were potentially of considerable value) were overlooked, perhaps erroneously because they were in payment, and that some of the pensions may have been matrimonial ‘assets’, contrary to the assertion there was no matrimonial property.
George Mathieson is not a FCA regulated person, and thus is not able to advise individuals on matters covered by the FCA regulation. Any guidance that George Mathieson supplies is not covered by those protections available for the regulated activities of RBC Brewin Dolphin; including access to the Financial Services Compensation Scheme and the service of the Financial Ombudsman Service.
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