The treatment of pensions in divorce cases has long been considered a complex area of matrimonial law.
Most family law practitioners now have a reasonable working knowledge of the first Pensions Advisory Group (PAG1) report, published in July 2019, which has become one of the leading practitioner guides in this area.
PAG is comprised of a multi-disciplinary group of experts, with specialist knowledge in the treatment of pensions on divorce.
President of the family division, Sir Andrew McFarlane’s introduction to PAG1 underlined its significance for family lawyers and their clients. T
he president referred to the report as “definitive guidance” and noted that “for too long the division of pension assets, which may often be of significant value, has been confused by jargon, complicated structure and changing provisions; for too long, also, tales of divergent approaches to pension sharing in different court centres have brought the integrity of the system into question.”
He warmly welcomed PAG1 for demystifying the area and establishing clear ground rules to be taken in every case.
Its successor, PAG2, was launched in January 2024 and reflects recent changes in case law and important feedback on the first edition.
It includes updated guidance and good practice in view of wider developments in family law and judicial authorities since 2019 and is recommended reading for any adviser that interacts with pension sharing on divorce.
It has also been updated to reflect recent case law more generally. There are some notable developments in parts four, six and seven of PAG2. For example, part seven also now includes reference to the Galbraith tables.
In terms of PAG2 reflecting recent developments in case law, a chain of authorities to include W v H [2020] EWFC B10, KM v CV [2020] EWFC B22, and RH v SV [2020] EWFC B23 are particularly noteworthy, reiterating the starting point (at least in needs-based cases) that pre and post-marital accrual will typically be taken into account when assessing pension sharing on divorce.
Nonetheless, this approach could produce unfair results in certain situations, potentially for example where there is a significant age or income gap between parties, if one party began contributing many years before cohabitation or in the case of second marriages.
This approach also arguably sits at odds with other areas of family law where, for example, the ring-fencing of non-matrimonial assets might be more generously interpreted by courts when they are dealing with assets that have not been pooled within the marriage; notwithstanding that the court must still have regard to them as a resource available under s.25(2)(a) of the Matrimonial Causes Act 1973.
This feeds into a wider debate as to whether pensions should be divided to equalise the income they produce in retirement or on the basis of their capital values, which judgments such as like CMX v EJC [2022] EWFC 136 have brought to the forefront of discussion in recent years.
