It is clear the trend in recent judgments swings towards equalisation of income, but this does not produce an equitable result in all cases and judges are not unanimous in their approach, as CMX v EJC shows.
Practitioners should be mindful that the tide could well turn on such issues and each case will be assessed on its own facts. In many instances, pensions may well be regarded by the court as a deferred income in retirement, but CMX is a reminder that not all judges look at these issues through the same lens.
Invariably, pensionable assets have often been regarded as having a flavour quite different to other capital resources, however it is not always practicable or just to simply say that the same approach should be taken to pensions as to other capital assets, not least because other assets may by their nature be more easily realisable and may be able to be employed more directly to meet capital (and often housing) needs.
PAG2 does identify an increasing “blurring” of pensions with other assets in recent cases and creative solutions are being considered, for example where parties need to draw down from a pension pot to fund housing needs on divorce. The pension freedom rules have introduced greater flexibility, but also risk, in this area.
Even where PAG2’s guidance is clear, it is worth bearing in mind that case law in this area is evolving with some pace and remains liable to sudden change.
PAG2 recognises that cases tend to sit along a continuum. For example, in the majority of modest, needs-based cases, the equalisation of incomes in retirement is likely to still be regarded as the most appropriate way to go.
As we move up the scale towards higher value cases, the equal sharing capital might be the more appropriate way to go.
For cases in between, there are arguments that cut both ways.
In the absence of more explicit judicial guidance, such cases can be more of a lottery. The resulting uncertainty can drive dispute, reduce the likelihood of early settlement and potentially increase the risks of further litigation.
More certainty in this area would not be unwelcome, but invariably the judiciary’s challenge is in trying to strike the right balance between flexibility and certainty. What works in one case may not in another.
Fundamentally, difficulties can arise when there is a significant differential in age or in the parties’ income-generating capacities. PAG1 identified some ways to potentially deal with these problems; PAG2 expands on those, with further exploration of how various planning tools can be employed to achieve fairness.
