A key question for the Court to consider when a spouse dies shortly after the conclusion of financial remedy proceedings is whether the death invalidates the ‘fundamental assumption’ upon which a Pension Sharing Order was made. Beth Hothersall reviews a recent case in which the High Court ruled that the nature of a pension is flexible, and, in each case, it is necessary to give detailed consideration to the parties’ reasons for agreeing to include a Pension Sharing Order in their final settlement.
The parties settled their financial remedy proceedings in January 2021 by way of a Consent Order. The final Order included a Pension Sharing Order in favour of the wife for 51% of her husband’s pension which was worth approximately £600,000. However, as the divorce proceedings were not concluded until 8 July 2021, implementation of the Pension Sharing Order could not commence until after that date.
Sadly, the wife discovered she was terminally ill in June 2021 and later passed away on 3 August 2021. On 4 August 2021, the husband made an application to set aside the Consent Order including the paragraph concerning the Pension Sharing Order. The wife’s executors contested the application. The Court determined that the appropriate test to apply in this case was that which was laid down in Barder v Barder (Caluori intervening)  AC 20, namely, did the wife’s death invalidate the ‘fundamental assumption’ upon which the Order was made?
To answer this question, the Court considered the correspondence between the parties in reaching settlement as well as the report from the Pensions on Divorce Expert. Having done so, the Court was satisfied that the ‘fundamental assumption’ upon which the Order was made was to ensure that the parties had sufficient income in retirement. The Court therefore ruled that the Order should be set aside as the wife’s income needs in retirement no longer existed.
The Court did, however, determine that the wife’s estate should still be entitled to some share in the husband’s pension. It was concluded that the appropriate share was 25% to reflect the wife’s ‘earned’ share during their 38 year marriage whilst providing a ‘discount’ for the many years during which income would not be required by the wife following her death. The above case highlights that whenever a Pension Sharing Order is made, it is essential for the person benefitting from the Order to ensure the following:
- That the divorce proceedings have either concluded or are concluded as soon as is possible after the Order is made;
- That the request to implement the Pension Sharing Order is made to the pension provider as soon as is possible thereafter.