“This case means that in Scotland the pension rights which are included within matrimonial property on divorce are more extensive than was previously understood. The expression “period of membership” is not limited to the period during which the benefits have accrued or built up, but includes all periods during which a person has benefits in or is receiving a pension from the scheme.
“This case was a relatively extreme one, where almost all the benefits were “earned” or “accrued” before the marriage, while the husband continued to participate in and receive benefits from the scheme throughout the period of the marriage. The difference between the figures produced by the formula on the two possible interpretations was therefore substantial.
“It should be noted that although the decision extends the scope of pension rights which have to be taken into account, it does not follow that the value of the pension which is matrimonial property will always have to be shared equally. Lord Hodge made clear that other provisions of the Family Law (Scotland) Act 1985 give flexibility to determine that another split may be more appropriate. It would therefore still be open to the court to decide that something other than equal sharing is appropriate where the bulk of the pension rights which form part of the matrimonial property were built up before the marriage.”
Background:
This case considers the extent to which in Scotland an occupational pension should be regarded as matrimonial property, the value of which has to be taken account in divorce proceedings. Mr McDonald joined the British Coal Staff Superannuation Scheme on 11 December 1978. In March 1985 he married Ms Newton. On 10 August 1985 he retired, as a result of injury. He ceased making contributions to and began to draw his pension from the scheme. The couple separated on 25 September 2010, when the cash equivalent transfer value of the pension was £172,748.38.
The question arose as to what proportion of the pension was to be treated as matrimonial property. This required the application of a formula set out in regulations. One of the elements of the formula is "the period of membership… …in the pension arrangement". The value to be taken into account as matrimonial property depended on whether that phrase meant "active membership" only, or whether it included the entire period of participation in the scheme, whether as an active, deferred or pensioner member. If only active membership counted, then the value produced by the formula was £10,002, because the period of active membership during the marriage was very short. However, if the period of “membership” included deferred membership and pensioner membership as well, the value was £138,734, because a greater proportion of the overall value would be attributed to the period of the marriage.
The Sheriff court, and the Court of Session (with one judge dissenting) decided that the expression referred to “active” membership only, so that only the lower value fell within the scope of “matrimonial property”. The Supreme Court has unanimously rejected that view, deciding that the expression “period of the membership” includes all periods of “membership” of all types, and is not restricted to the period during which benefits are built up or contributions are being paid.
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