Until relatively recently it was very common to see joint lives maintenance orders included in financial orders made by the English courts on divorce where there had been a long marriage and a sizeable income disparity between the husband and wife.
Over recent years this is become far less common, as the courts strive to bring about a clean break between a couple as soon as possible and better promote the autonomy of individual spouses looking to go their separate ways.
There still remain a good many situations where divorces concluded many years ago require maintenance entitlements to be paid many years on.
Often those obligations carry on for the joint lives of the couple, only stopping when either the former husband or the former wife die. This can be a heavy financial burden for the payer of maintenance to carry for the rest of their lives, particularly when they retire.
Why was retirement not factored in when I divorced
The question as to how retirement should have been accounted for when the order was made is one I receive a lot when I am looking at these ongoing maintenance obligations for my clients. Why was the original order not adapted to forecast the need for my client to retire, for example.
The difficulty here is that it can be very difficult to predict with any certainty (a) when one is likely to retire or (b) what their circumstances might be 10, 20 or even 30 years into the future. Whilst we are constantly striving to draft financial orders that self-adjust in certain circumstances, it is very difficult when looking specifically at maintenance to do that in a way that adequately caters for every situation.
This is a difficulty that practitioners have had throughout the time that maintenance has formed part of the conversation on divorce. Whilst creative solutions to the problem have been devised and can be deployed by complicated orders to try to adapt to changes in circumstances, by far the best solution is to avoid maintenance altogether if possible.
This does not help those ex-spouses who are carrying a maintenance burden many years after their divorce.
Changing the maintenance obligation
There is, however, a solution to that obligation that many former spouses do not often appreciate. The solution comes as a result of the “variable” nature of maintenance obligations. Either the former-husband or the former wife have the ability to review the level and appropriateness of the maintenance payment. This can often be prompted in one of two ways:
- If either the payer or the payee’s financial situation changes. This will often be as a result of changes to either former spouse’s income or outgoings.
- If the payer is able to “buy out” their former spouse’s claims.
Changes of financial situation altering maintenance
Maintenance is now generally only ordered in the event that both (1) the recipient has a shortfall of their income against outgoings and (2) the former spouse has sufficient surplus income above their own reasonable outgoings to afford to pay it.
There are two factors on each side that determine whether maintenance will arise: income and outgoings. The income deficit on one side and income surplus on the other side mean that there is very much a focus on numbers to determine whether maintenance should be paid and, if so, how much.
For maintenance to arise there needs to be sufficient income on the part of the payer. If the income isn’t there, the maintenance obligation should in theory reduce as well.
Another cross check when looking at this is the percentage of income that is being paid in maintenance. There is certainly no obligation to share income on divorce in the same way that there can often be an obligation to share capital. This means, for example, that generally speaking 50% of one’s income should never have to be paid in maintenance in the long term. Whilst that ceiling can sometimes be breached in respect of interim maintenance, which is maintenance paid whilst divorce is ongoing, maintenance payments should never routinely exceed around 40% of one’s net income.
Maintenance payments and retirement
The very nature of one’s retirement means that income profiles move from being salary based to drawing down or often receiving from a define benefit scheme a pension payment. The new pension income will often be less than the payment received by way of salary.
This reduction in income means the payer will have less of a surplus as against their outgoings to be able to afford to make the maintenance payments. That can mean that they have less money available to pay maintenance to their former spouse. In that situation it is likely to be worthwhile at the very least reviewing the level of maintenance that is paid, and indeed, whether it should continue to be paid.
The courts would certainly not expect an individual at retirement age to continue working just because they have to pay their former spouse maintenance. That individual should be entitled to retire and do so in an affordable way. They should not be the only one having to make compromises against their outgoings, leaving their former spouse to continue to receive maintenance payments far higher than a reasonable proportion of that retirement income.
I have acted for many clients who have been left in this situation when looking to retire. It is often possible with the information available to review the maintenance payments and agree a new rate of maintenance. In some instances, it is clear that maintenance should no longer be paid and it is possible to agree that as well.
In a small number of situations, it can be necessary to refer the situation to court or arbitration to resolve. As against the cost of the ongoing maintenance payments this is an exercise that we ensure is going to be proportionate. The courts are able to resolve maintenance variations and in a relatively timely way. It really is exercise worth undertaking for many in that situation. Without exception, those clients I have assisted in these circumstances have been relieved to step away from their maintenance obligation and move forward with the next chapter of their life.
Buying out the maintenance claim
Buying out maintenance through the payment of a single lump sum can be a great solution to ongoing maintenance payments at retirement age. In the event it is clear that the maintenance obligation should still arise post-retirement, it is possible to capitalise it and settle the obligation through the payment of a single lump sum. Once that lump sum is paid, it is agreed that the ongoing maintenance should stop. The payer of the lump sum is then free to carry on their lives without the obligation to pay monthly maintenance to their former spouse. The recipient of the lump sum can invest the lump sum and draw down on it in place of the maintenance that they were previously receiving.
Many clients I have assisted have chosen to resolve any ongoing maintenance obligations in this way.
Final thoughts
Many former spouses would prefer to free themselves from ongoing maintenance obligations many years after they have divorced and moved on with their lives. This can particularly happen on their meeting someone new or often at retirement age. Reviewing, varying and potentially stopping the maintenance payments can provide them with the long-awaited freedom they are looking for.
If you would like to discuss the situation with myself or the Family Law team, please do get in touch, we would be happy to help.