Protecting Maintenance against Inflation

We are all aware of the impact of rises in the cost of living.  Food prices and petrol  all go up but very seldom down. If you are reliant upon maintenance payments (also known as periodical payments) following divorce, then the real value of those payments is going to decrease over time as the cost of living rises.  Unless, of course you are able to link the maintenance payments to the increases in inflation.

If your lawyer  is negotiating maintenance for you, either child periodical payments or spousal periodical payments, he or she should make sure that the payments will be increased each year to keep up with the rising cost of living.

The usual method is to link payments to the Retail Prices Index (RPI).  The RPI is the Government’s ‘shopping list’ of the items we all need to spend money on in the shops as well as other common expenses thrown in like mortgage interest, transport costs and council tax.  So lawyers will directly link their clients’ maintenance to the RPI.  By way of example, if a person is awarded £6,000 a year maintenance and it is index linked (linked to the RPI) then every year the £6,000 will be increased by the rise in inflation over the year in question.  So, the net effect is that the £6,000 will increase to, say, £6,300 in the second year.  The same exercise will be repeated each year for the duration of the award of maintenance.

Although there may be instances where it is not really necessary to link payments to the RPI, such as payments that may only be in existence for a short period of time, or where the payments are nominal payments (0.5 pence per year), you should ask your lawyer about linking any payments of maintenance to the RPI.

 

 

 

 

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  1. Mandy’s avatar

    I have not been paid the index linked on my maintenance since 2006/7. The maintenance is £1000 per month, can you tell me how much I am owed in arrears please?

    Reply

  2. DivorceFT’s avatar

    Hi Mandy,

    Can you tell me which month in 2006/2007 the RPI increase (on the sum of £1,000) should have taken effect in?

    Thanks

    Alan

    Reply

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