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Long-awaited pension valuation decision from the Supreme Court

2nd August 2017

McDonald v Newton or McDonald – [2017] UKSC 52 – The Supreme Court has ruled that the matrimonial property element of a pension is NOT limited to active membership

This divorce action started at Edinburgh Sheriff Court. Mr McDonald entered his pension scheme in 1978 and married in 1985. He stopped contributing later that year. He and his wife separated in 2010. The pension accumulated between date of marriage and date of separation was £138,534. However the element built up during his “active” membership, i.e. when he was making contributions, was £10,000. The Sheriff held that it was only this part which constituted matrimonial property and the Appeal Court agreed. Mrs McDonald appealed to the Supreme Court.

The Supreme Court looked at the two pieces of Scottish legislation relating to this matter. Firstly, the Act which defines matrimonial property as, with some exceptions, all assets acquired between the date of marriage and the date of separation. Secondly they looked at the Regulations which detail how to value the portion of a spouse’s pension which is matrimonial property. The Court said that the Regulations stated that they applied to both occupational and personal pension schemes. The Court pointed out, however, that the concept of “active” membership could only possibly apply to occupational schemes. Accordingly to imply “active” membership was adding words to the Regulations that did not make sense. The Court also opined that if Parliament had intended to limit the definition in this way it would have done so specifically.

Pensions can be very complex assets to deal with as part of any separation. It is therefore essential to take expert legal advice to avoid prejudicing your case.

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