A wife has won an appeal to the UK Supreme Court for a bigger share of her husband’s pension rights following divorce after the court ruled that her husband’s “membership” of a pension scheme included the time that his pension was in payment as well as the time he was paying in contributions.
Five Justices unanimously allowed an appeal by Annie McDonald from the decision of the Court of Session in favour of her husband Thomas, a former miner who joined the British Coal Staff Superannuation Scheme on 11 December 1978 and contributed to it until he retired early on grounds of ill health in August 1985 and exercised his right to receive a pension income. The parties married in March 1985 and separated in September 2010. Mrs McDonald sought a pension sharing order under section 8(1)(baa) of the Family Law (Scotland) Act 1985. The question for the court was the proper application of the formula in reg 4 of the Divorce etc (Pensions) (Scotland) Regulations 2000, one element of which is "the period of the membership of that party in the pension arrangement before the relevant date”.
The courts below accepted Mr McDonald's argument that the court should apportion the value of his pension rights by reference only to the period in which he was an “active member” of the scheme, making contributions (click here for Journal article). On that basis, the value of his interest in the pension benefits which was matrimonial property would be £10,002. Mrs McDonald argued that the value should be apportioned by reference to the period of Mr Macdonald’s membership of the scheme, both when in pensionable employment and also when drawing a pension, that value being £138,534.
Lord Hodge, with whom the other Justices (Lady Hale, Lord Wilson, Lord Carnwath and Lord Hughes) agreed, said there were four reasons why “membership” should not be confined to active membership of a pension scheme. First, interpreting reg 4 as so confined involved adding words which were not there. Secondly, the regulations applied to both occupational pension schemes and personal pension schemes. The definition of “active membership” in s 124(1) of the Pensions Act 1995 made no sense in relation to personal pension schemes. Thirdly, reading the word “active” or “contributing” into reg 4 could not be supported by referring to the focus in s 10(4) of the 1985 Act to the acquisition by the parties of assets during the marriage but before the relevant date, as s 10(4) was subject to s 10(5), which dealt specifically with pensions and made separate provision. Fourthly, it was not persuasive that “membership” in reg 4 had to mean active membership in order to give meaning to the statement that factor B in the formula could be zero. Again there was no hint of such an intention in the words of the Regulations. Further, Mr McDonald’s interpretation might often create an apportionment which bore no relationship to the relative value of the rights acquired before and during the marriage.
This interpretation, he observed, did not mean that the value of an interest in a pension had to be shared equally. Section 9(1) of the 1985 Act contained other principles to introduce flexibility into the award of financial provision, as did the recognition in s 10(1) that there might be special circumstances for departing from the equal sharing of matrimonial property.