child maintenance

You are currently browsing the archive for the child maintenance category.

German children playing with Reichsmarks rendered worthless by inflation

I tried my very best fairly recently to explain what a maintenance order looked like. I also explained that it could be protected against inflation by a link to the Retail Prices Index.  I even tried to show how such an order could be varied, relatively simply, by the parties themselves.  I was so eager to please, I even produced a sample letter that could be sent to the ex-spouse to explain what was required so all confusion and ex-marital strife could melt away. 

I then received the following enquiry: 

I have just read your article on RPI and periodical payments (spousal maintenance). It was very helpful. However, what would be very helpful is clarification on the 2nd year and subsequent years. I have the PP’s linked to RPI (at my request) and my divorce went through on *****. The wording was nigh on identical to what is in your article, and others I have read. However, confusion is this: The first year was easy to work out. The initial payment upon divorce was £250 pcm. The following year, Feb 2011, and the payments increased to £261.77. This is where the arguments have started: My ex husband says that when working out THIS year, 2012, that he again uses the figure of £250.00 and NOT the last figure of £261.77. I dont agree. As when the economy picks up, I could see one year in the future getting LESS than I do this year, ie LESS that £261.77. Please can you clarify if, the STARTING figure on each variation date is the initial award figure (£250) or the INCREASED figure from the previous year?
Well, the right answer is that the starting figure on each variation anniversary is the increased figure from the previous year.  in other words, the amount keeps going up each year so as to protect the real value of the payment from the constant increase in the price of living caused by inflation.
Over and out.  For now.

Tags: , , ,

RPI/CPI Comparison 2009 to 2011

Divorce maintenance payments: CPI or RPI

I have written before about whether maintenance payments for spouses and child support on divorce should be inflation-proofed by automatically increasing their value by any rise in the Retail Prices Index (RPI).  I pondered whether such a link could be made instead to the lower figure of the Consumer Prices Index (CPI).  I noted the Government’s quiet adoption of the CPI for the payment of benefits as a way of saving money in real terms.

Divorce solicitors will usually seek to protect the value of their client’s maintenance payments by linking future increases to the RPI.  However, the mass strike by public servants on 30th November this year (in part because their pensions are now subject to the lower CPI link) demonstrates that these policy decisions matter.  Likewise, a client who is awarded maintenance linked to the CPI over 15 years is going to be significantly disadvantaged in comparison to the client whose payments are linked to the RPI.

Rise of the CPI?

Surely this just means that solicitors should demand that the link is to the RPI?   After all, that’s the way it’s  always been, isn’t it?  So, it must be set in stone?  Perhaps no longer. The High Court today decided, in the face of a legal challenge by trade unions, that the Government’s linking of public sector pensions to the lower CPI figure was lawful.  Lord Justice Elias stated, in his judgement:

“The use of RPI has in the past been merely current practice.  Looked at objectively it could not properly be asserted therefore that any promise of its continued use had to be assumed”.

Personally, my view is that a link to the RPI for maintenance payments would still be appropriate since this is an inflation measure that includes the cost of housing (which the CPI excludes).  I cannot imagine many clients thanking their solicitors for securing a link to the ‘poor cousin’ CPI inflation measure.  But, as Lord Justice Elias demonstrated today, in these more economically austere times,  old assumptions may no longer hold true.

 

Tags: , , , ,

I’ve been asked if there is a standard letter to remind the payer of maintenance that the first (or subsequent) anniversary of a maintenance payment order is imminent and that the payment is to be varied upwards by the Retail Prices Index (RPI).

Whilst I’m not aware of a standard letter, I’m happy to offer the following template that can be adjusted as thought fit.  This is written directly to the ex-spouse as, in most cases, the whole point of an automatic uplift by reference to the RPI is that people should be able to operate it themselves instead of going back to lawyers.

It is a good idea to have a diary reminder to write to your ex one month before the maintenance is due to be varied so there is time to agree the amount and have it set up.  I am presuming that most people will be emailing rather than sending a traditional letter.  In an effort to be helpful I have used the same assumptions for the amount of maintenance and the time periods as in my worked example for ease of reference and comparison.

Dear Ex,

I thought it would be a good idea to just remind you that my spousal maintenance payments are due to be varied on 25th November 2011.  (I have a copy of the court order if you do not have yours to hand).

I am presently receiving £112.00 a month from you.  The new maintenance amount needs to be calculated correctly and we will both want to be satisfied it is right.  

I understand that to carry out the calculation we need the RPI figure for August 2010 and that was stated in the court order to be 224.5.  We also need the RPI figure for August 2011 which is 240.0.   To obtain this I looked at data on the RPI kept by the Office of National Statistics.  I have included the link so you can check for yourself or you could contact them by email on info@statistics.gov.uk.  

The calculation is as follows: 

    • The figure of £112.00 is multiplied by the RPI figure for August 2011.  £112.00 x 240.0 is £26,880.  If we then take the sum of £26,880.0 and divide it by the RPI for August 2010 (which is 224.5) the result is £120.00 (rounded up).
    • So, while you are presently paying £112.00 per month, the payments will need to increase to £120.00 commencing with the payment in November 2011.  
I would be grateful if you could acknowledge this email and confirm that you agree with my calculations and that the standing order will be amended in time for the November 2011 payment.
Good luck with this.  There is no reason why the same template letter/email could not be used to vary child periodical payments as the mechanism and the calculation is the same.

Tags: , , , ,

Life has been very busy at Divorce FT Towers but, while I wait for the kettle to boil, I’ll pop out this post on the variation of maintenance. I’d promised this some time ago, prompted by the number of people I had come across who had never varied their maintenance orders because they did not know how.  This is their lawyers’ fault of course, because they should have been given some guidance on how to do this at the end of their cases.

Now the first thing to point out is that the wording divorce lawyers use to set out the mechanism to vary a maintenance payment is something like a cross between ancient Greek and Klingon.  It will read something like this:

On ‘the variation date’ which shall be on the date of the payment due in November 2011 and at yearly intervals afterwards, the periodical payments set out in Paragraph 4 [imagine spousal periodical payments] of this order shall stand varied automatically.  The change in the payments shall be the percentage increase, if any between the retail prices index  for August 2010 [15 months  before the date of the first variation} which stands at 224.5 and the retail prices index for the month three months before the variation date.

Got that?  No?  Don’t worry, you’re in good company.  Let’s try and decipher this gobbledegook.

Here are the simple steps:

  1. The spousal periodical payments order  in the example above is to be varied on 25 November 2011.  This will be 12 months after it was directed to start by the court.   What you will be doing is obtaining the Retail Prices Index (RPI) figure for the period 15 months before the anniversary in November 2011.  This figure will be for August 2010 and we can see that the RPI for that date is 224.5.
  2. So, how did I know the RPI figure for August 2010?  Easy, I looked at data on the RPI kept by the Office of National Statistics.  Alternatively, you can contact them by email on info@statistics.gov.uk.
  3. What you then need to do is to ascertain the RPI figure for the month which will fall three months before the anniversary date in November 2011.  I can tell you the month that you will need is August 2011.  I cannot tell you the RPI figure for August because it will not be published until around October of 2011.

However, I could give you an example of how to work out the increase as follows:

  • The figure that is going to be varied in this example will be the sum of £112.00 per month.

 

  • The figure of £112.00 is multiplied by the RPI figure for August 2011 (that will not be published until around October 2011).  For the purpose of this example, let us speculate that the figure for August 2011 will turn out to be 240.0.

 

  • £112.00 x 240.0 is £26,880.  If you then take the sum of £26,880.0 and divide it by the RPI for August 2010 (which is 224.5) the result is £120.00 (rounded up).

 

  • So the Payer of the maintenance in this example, presently paying £112.00 per month, will have the payments increased to £120.00 commencing with the payment in November 2011.  You would then apply the same variation formula to the new sum of £120.00 in November 2012, and so on each year.

Phew.  It does make sense, if you follow it through carefully.   The kettle has boiled. Time for tea.

 

 

Tags: , , , ,

Newer entries »