I divorced my husband twenty years ago and was awarded a small amount in a lump sum to purchase a house for myself and our two young children. So small that I had to take out a mortgage and work part time. The children are now adults but I have a court order for life for a regular payment until I re marry or die. neither of which I intend doing anytime soon.
My ex-husband who is wealthy took me back to court seven years ago to stop my monthly payment of £836 however the judge said at the time he had over £600,000 in his pension pot, owned a house worth close to £2m, owned half his father’s house and his sister’s house and had just paid his second wife a large settlement. He was asked to find out when he could start drawing down from his pension and value his assets. He dropped the case.
Do I have a case to go back to court and ask for full and final settlement now I am approaching retirement age with very little pension to live on. I am now in rented accommodation as I have supported both of my children financially.
Toby Yerburgh, Head of Family & Divorce, responds:
You are the “lucky” recipient of a joint lives spousal maintenance order which entitles you to maintenance until you remarry, die, your ex-husband dies or further order. These are increasingly rare these days with the court looking to put a term on spousal maintenance orders even where, like you, recipients are non-working mothers with young children. (This ironically aligns us closer to the position in most European countries and Scotland where spousal maintenance tends to be limited to a couple of years at most. ) That said, spousal maintenance is always variable on the application of either party. On a variation application a court will look to achieve a “clean break” if possible i.e. to bring the spousal maintenance to an end upon payment of an appropriate lump sum. This is a two stage process. The court will look to vary the maintenance figure up or down depending upon the circumstances. This will principally be based upon your own and your ex-husband’s needs and financial resources. Once the court has settled on a figure it will look to see if this can be capitalised. This will depend upon there being free capital available to your ex-husband that the court considers can be used for this purpose.
The starting point for capitalisation in a case where there is a joint lives order will be the Duxbury tables which are a set of actuarial tables used by family lawyers to work out the lump sum payable in to replace a specific net income from spousal maintenance for a recipient of a specific age. These assume among other things: constant drawdown; a 3% income yield; capital growth at 3.75%; a 3% rate of inflation; and that you will use all of the income and capital and survive for precisely as long as the average for your contemporaries.
For example, if a court decided to increase your maintenance to £15,000 pa to take account of inflation over the last 20 years and you were aged 65 at the time of the hearing the Duxbury tables suggest you would need a lump sum of £128,000. That said, if you could not persuade the court to increase the spousal maintenance figure from £10,000 pa, the starting point for the lump sum would only be £52,000.
That said, the court uses the Duxbury tables as a tool rather than a rule and is ultimately looking to achieve fairness. This could lead to an increase or a decrease in the lump sum payable depending on all of the circumstances. Ultimately though, as you can see from the Duxbury figures, there would be a significant risk to you in making an application for a variation as lump sums at this sort of level will not generate anything like the £10,000 pa net you are currently receiving.
This piece is extracted from a longer article first published in the Financial Times in March 2020.