RPI

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Maintenance increase by the RPI

January 9, 2013 in spousal maintenance, Variation maintenance by Alan Larkin | No comments

Many a mickle makes a muckle (so long as you don’t ignore inflation)

If you have done the hard work of agreeing maintenance upon divorce and have sensibly put in place a mechanism to automatically increase the payment each year by the rate of inflation, then pat yourself on the back.  You’ve done all you can to avoid having a huge row with your ex each year about the amount of any annual maintenance increase and the prospect of an expensive return to the family court to argue the toss in front of a judge.

But, as I have discovered from my virtual postbag over the last two years, the scope for argument and misunderstanding still exists.  I have just heard from Lianne:

I wonder if you would please help solve an issue between my ex-husband and myself.

I am due to receive an annual RPI increase from 1.1.13. (date stated in my Court Order).

I receive my monthly maintenance payments on the 16th of each month.
Can you please clarify which months RPI figure is the one that should be used? My ex is saying that it should be the one for Sept. 2012 as the Court date is the first of the month.

My view is that it should be the figure for Oct. 2012 regardless of whether the increase is for 1st or the 16th of the month, as it is the actual month that is the deciding factor not the date of the month.

Thank you for your time and attention.

Well, I’m with Lianne on this one.  The normal mechanism is to use the RPI figure for the month three months before the month in which the maintenance is to be increased.  So that would be October.   For any visitors of the blog for which that sentence reads like gobbledegook, you will have to read the other posts and comments on this subject using the RPI tag in the Cloud Tag on the left hand side of the page.  The important thing to note is that the increase in maintenance is based on the increase in inflation in the preceding (or as near as dammit) 12 months.  There is always a lag before the Office for National Statistics can calculate each month’s RPI figure and then release it to the public.   So it is common to take a figure three months prior to when the increase is due because the RPI figure should be in the public domain by then.

If anyone wants to work out how to calculate an RPI increase then look no further.

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Child support: arrears of maintenance

November 27, 2012 in child maintenance, spousal maintenance, Variation maintenance by Alan Larkin | No comments

I have visited the topic of child support on many occasions. My virtual postbag this week has several examples of one common scenario: where the husband and wife start off by getting it very right, with an appropriate order for child maintenance upon divorce, but then, somehow, it goes very wrong.  The sad thing is, it goes wrong, very often, because of a basic misunderstanding. Most of this should be avoidable.

To the postbag…

Suzanne writes:

 

I have a court order (payable by standing order monthly) which has been running for 8 years. After the first year my ex husband refused to pay the yearly increase, and has been paying the same amount ever since. I have now requested that he increases the maintenance but he still refuses to do this.  Can you please advise what the yearly increase should be as I have no alternative but to take this back to court.
Also will he have to pay the arrears?

I have re-married two years ago, would this affect the payments?

Child maintenance

Suzanne later confirmed to me that this is a case of child maintenance.  In which case, Suzanne’s re-marriage is of no consequence whatsoever.  The child maintenance must be paid in accordance with the terms of the court’s order.  It is a great pity that the ex-husband has failed to observe the increases each year ordered by the court.  In the first place, the order for child maintenance would only have been in a court order if the husband agreed to the family court having jurisdiction for dealing with child maintenance (instead of the CSA).  Secondly, he would have agreed to the yearly increases (normally by reference to inflation measures like the Retail Prices Index) as he must have recognised that the cost of living – especially in relation to kids – only goes up and never down.  So his refusal to honour the increases he agreed is disappointing.  As I have commented before, the costs of bringing up children is usually underestimated.

Suzanne has asked me what the yearly increase should be.  Unfortunately, I cannot calculate that without knowing the amount of the original award, the date it was awarded and the mechanism used in the court order to determine the yearly increase.  But, I have laid out in previous posts how to calculate the yearly increase and also how to calculate the amount of arrears that have arisen when the yearly increase is ignored.  Click on “RPI” in the Tag Cloud on the left hand side of the web page: this will bring up all my previous posts on this issue. 

One issue here, if this is a child maintenance order, is that in the case of a disagreement over the amount of child maintenance, the family court responsibility comes to an end and the parents will have to look to the CSA.  The usual scenario is that one parent wants to receive more or one parent wants to pay less.  This would require a variation of the original order for child maintenance and this variation must also be by agreement.  But, in Suzanne’s case, she is not talking about changing the amount of the original order but rather simply requiring that her ex pays the yearly increases he promised. Suzanne, if she gets legal advice, may be told to apply back to the court to enforce the payment of the arrears.  But you have to get the court’s permission to recover more than the last 12 months of arrears.  The application is made on Form D11 (Family Procedure Rules, 2010, Part 18).  Suzanne would need to set out her calculation of how those arrears had arisen.  This is not that easy but look at my previous posts in the Tag Cloud for “RPI” and “Child Maintenance”.

The alternative for Suzanne if she wanted, would be to refer her ex-husband to the CSA so they could carry out a fresh assessment of the amount of child maintenance to be paid.  The CSA would not be able to recover the arrears for Suzanne under the court order but I suspect the ex-husband would end up paying more towards his child or children under a CSA assessment than under the court order which is now 8 years old and has not been increased each year.  The CSA may refuse to act though if Suzanne’s child or children are too close to the age of 17 (when CSA responsibility comes to an end).  I don’t have enough detail here to make any further comment.

So, if Suzanne took legal advice, it may well be that she should apply to the court to enforce the arrears.  Remember, that her ex could refer himself to the CSA and if they took responsibility for the situation then the family court order dealing with child maintenance comes to an end, and with it, any prospect of recovering any arrears.  So Suzanne may want to get her application into the court for enforcement first, and recover as much of the arrears as possible.  Since her ex will then have to disclose his present income in those proceedings, she can ask her legal advisers to calculate how much he would pay if the CSA were involved. She can then take advice upon whether to refer the child maintenance to the CSA from that point onwards if the award would be higher than she presently receives under the family court order.

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Child support: excluding the CSA

May 26, 2012 in child maintenance, Self-Representation, Variation maintenance by Alan Larkin | 1 comment

Child support: excluding the CSA

Full of cheer? The Christmas Order

Self-represenatation in family proceedings is difficult.  Many litigants in person, or ‘self-reppers’ find it hard to fund legal advice from a family specialist.  This is particularly so where the only dispute may be about an income claim such as child support because it is not as if you may recover a valuable asset or receive a lump sum out of which you can repay your legal fees at a later date.

When faced with a self-repper, a family solicitor (who, we must remember is an officer of the court) should try to assist the litigant in person to understand the process or the proposal being made.  This is not to say, that the solicitor must advise the self-repper: they cannot do that as it would be a conflict of interest with their role as an advisor to their own client.

I have a great deal of sympathy for self-reppers, as may be evident for any regular readers of this blog.  When facing them in court I go out of my way to be courteous and helpful, mindful always of the stressful nature of the proceedings in which we are all involved.  I have sometimes had self-reppers throw doubt upon my parentage, but I don’t mind as I know, in most cases, it is just the pressure of the situation getting to them.

Unfortunately, this pressure of the occasion at court can cloud the judgment or even hinder the understanding of self-reppers.  This is presuming of course, that the lawyer on the other side of the self-repper and the judge have sufficiently explained the situation to the self-repper.  This is the subject of a recent enquiry from a ‘troubled mum’:

My son settled in court to pay a woman he had a one night stand with £750.00 per month. This was at a stage 2 meeting. My son had to represent himself because he could not afford the legal fees. The barrister representing the applicant explained the order was a “christmas Order” which meant it could be looked at again if my son were to win the lottery or found himself without a job ( I was there I heard the barrister say this) We now have received a typed up copy of the court order that we agreed on the 3rd May to let a legal person look at it. We have been informed the words “Christmas Order” means it automatically goes up each year which we were definately not informed that this was the case. Can we ask the court to take out that clause because we were informed wrongly of its meaning please help this is a nightmare regards very troubled mum

As ever, with many of the enquiries I receive, I do not have all of the detail but my initial thoughts are as follows:

  • I wonder why this matter was not dealt with by the CSA.  The child’s mother could simply have referred the case to the CSA to make a maintenance assessment and fix the amount of child support.  No need for her to pay for a barrister (unless she had public funding – or legal aid).
  • Since the CSA were not involved I am presuming the case before the family court was under Schedule 1 of the Children Act 1989 which can provide for financial orders between unmarried parents for the benefit of their biological child.  Such orders usually being:
    • Periodical payments (or child support)
    • lump sum orders (there can be more than one)
    • a property adjustment order (the provision of a house for the child and mother to live in) although the property will in most cases revert back to the father when the child reaches the age of majority.
  • If this case was being brought under Schedule I Children Act proceedings, then the father in this case could have referred himself to the CSA and the family court would no longer have the ability to make a periodical payments order.  The family court could still have made a lump sum order or a property adjustment order but whether the father had the financial means to meet such orders is not mentioned in the enquiry.  I suspect not.
  • The father has agreed (remember that the family court can only approve a child support order if it is with the consent of both parents) to a ‘Christmas Order’.  I have used such orders before but from memory I have only done so when my client’s spouse or partner has had legal representation.  This is because the Christmas Order attempts to oust the jurisdiction of the CSA (which, technically speaking, is against public policy).  Readers of this blog may remember that a court-approved child support order may only have a shelf life of just over 12 months because either parent can then refer the case to the CSA to take over and the family court order bites the dust.  A ‘Christmas Order’ is designed to automatically renew itself just before the 12 month period lapses so it is as if a new order is born out of the ashes of the preceding order each year.  Because the order never quite gets to be one year old before being renewed each year the CSA never gets to have jurisdiction.  The month of automatic renewal is usually December: hence the Christmas connection.   Clever. Unless you did not understand what you were signing up to.
  • A Christmas Order can be quite helpful in some circumstances but, as I mentioned earlier, I am troubled if the father of this child did not have a clear understanding of what he was agreeing to.  Without his consent this order could not have been made. Even if the barrister had not explained it clearly enough, I would have thought the judge, who approved the order, would have explained very clearly to the father what the Christmas Order entailed.  After, all it is an unusual order so the burden upon the barrister and the judge to assist the self-repper in this case is, in my view, even higher than normal.
  • The ‘troubled mum’ behind this enquiry and her son then consulted a ‘legal person’  with the result being: “We have been informed the words “Christmas Order” means it automatically goes up each year”.  That’s not right.  The Christmas Order operates as I have explained above: it automatically renews itself each year in such a way as to prevent the CSA having jurisdiction.  It would only go up in value each year if there was a specific clause saying that it will increase in value.  The normal mechanism for this to happen is to link the child support payments to the increase in the Retail Prices Index (RPI).  I have tried to explain how this operates in a number of posts on this blog. Again, I am troubled if the father in this case did not know he was agreeing to an automatic increase in the value of the payments each year.  Don’t get me wrong, I think such automatic increases can be a good thing but it is essential that all the parties (especially self-reppers) understand what they are agreeing to.)

Although I must reiterate again that I cannot advise anybody on the pages of this blog, one option open to the father is an appeal against the court order.  It will be an appeal against a consent order which makes it difficult to say the least but it may be worth a try if the father is certain that the order was not explained to him by the judge and that if it had been explained to him, he would not have agreed to it. The guidance for making such an appeal is here.  However, the usual time period for making such an appeal is 21 days from the date of the order so that time period has already passed.  It is, however, still possible to make the application to appeal (out of time) and the father may be given more leeway because he is unrepresented.

BUT: remember that such an order is variable.  That is, if there is a significant change in the father’s circumstances such as the loss of a job or a significant pay cut then it is possible to have the amount of the maintenance varied downwards on an application back to the family court.  At the same time the court could be asked to simply drop the automatic renewal (the Christmas Order) aspect of the child support so that it could, if either parent wanted to, fall back within the jurisdiction of the CSA in the future.

My inclination, if this father needed to vary the order in the future, would be to invite the mother of this child to mediation.  Much less stressful than contested proceedings.

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UK Budget 2012: impact on divorce and family law

March 22, 2012 in child maintenance, spousal maintenance by Alan Larkin | No comments

Contains more than the Chancellor’s sarnies

Mr Osborne’s UK Budget 2012 impacts on us all: but here is my kneejerk reaction to the changes that may be relevant for divorce cases,  and family law.  The Budget is portrayed as fiscally neutral but are there any nasty surprises in there for family lawyers and their divorcing clients?

    • Income tax personal allowance threshold is raised. For spouses on low income, working part time, this is a marginal improvement.  The Chancellor claims 2 million people will be taken out of tax altogether.  We will see.
    • Tax benefits, child benefits and housing benefits appear to be linked to CPI instead of RPI which is a clever, cumulative cut in the true value of these payments going forward.  I highlighted the CPI/RPI ruse in a previous post.  Expect lawyers acting for wives to continue to press for their client’s spousal and child maintenance payments to be linked to RPI to mitigate the impact of a realworld devaluation in child benefit and tax credits as the years go by.  Lawyers for the husband may argue the inflation link should be to the lower CPI measure “If it’s good enough for Mr Osborne…”
    • The big headline for Child benefit is threshold at £50,000 and taper up to £60,000.  A parent with 3 children earning £60,000 will lose approximately £2,400 per annum by these changes.  This will need to be factored in to any negotiations on child maintenance payments if an anticipated future pay rise sees the loss of such benefit. 
    • Spousal and child maintenance will continue to attract no tax relief at all to the person making the payments.  The person receiving the payments will not pay tax upon the same. 
    • NewBuy scheme on new build properties up to value of £500,000 could be helpful for individuals who have left a matrimonial home and who need to re-house themselves.  A deposit of between 5% and 10%  will be enough to secure a property instead of the market standard of 20%.  In matrimonial cases where liquid capital is tight, this could be helpful.   
    • Public sector pay is to made ‘more responsive.’   Not clear how this is going to pan out: some commentators say public sector workers in the North of England could find their pay frozen.  Differentials will presumably grow, quite intentionally, between workers in the same jobs but in different parts of the country.  I would certainly want to know whether my client was going to be finding themselves in a ‘more responsive’ part of the jurisdiction if spousal maintenance or child support issues were in question.  If I am acting for the payer of maintenance in those circumstances where the value of their pay is going to be eroded, I would be resistant to agreeing any RPI link at all.
    • VAT exemptions will remain on food, clothes and books.  Anyone raising kids knows just how much the little darlings cost so this is a relief for those on tight budgets receiving modest child support maintenance payments.

That’s it folks.  For now.

 

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Arrears of maintenance following divorce

March 19, 2012 in child maintenance, Enforcement, spousal maintenance, Variation maintenance by Alan Larkin | No comments

Many a mickle makes a muckle

Spousal maintenance issues following divorce continue to dominate my post bag.  In particular: the automatic variation of maintenance following a divorce financial order by reference to the RPI.

What has been genuinely illuminating to me as a family law specialist is the extent to which there is boundless room for confusion over the interpretation of a maintenance order, whether spousal or child support.

This week’s postbag:

John (not his real name) had read some of my blog posts and then asked:

Re: Variation of Maintenance agreement. Could you clarify how it works for second and subsequent years.  My ex-wife and I disagree. She says that the shortfall is cumulative. [further details omitted to avoid personal identification]
The details provided by John made it clear that he had been paying the maintenance ordered by the court but, for whatever reason, the link to the RPI which was intended to increase the amount of the maintenance each year, had gone by the wayside. So, the sum of maintenance approved by the court in the original order has not been increased, as was intended by the order, for three years.  John and his ex cannot agree  how the shortfall created in the past is calculated or applied so they can get back on track.

The solution

I suggest the art of the practical.  Strictly speaking, the non-payment of the inflation-linked increase each year constitutes arrears.  For example, let’s say the original sum ordered by the court is £1800 per annum.  At the first year anniversary the application of the RPI link, if it is applied, would have increased the original sum.  Let’s imagine it is by £150 per annum.  So the second year sum of maintenance is £1950 per annum.  Upon the second year anniversary let’s imagine the RPI increase is £250 per annum.  The increased sum paid is therefore £1950 plus £250 = £2,200.  Continuing on this path, the third anniversary is (let’s say) an increase of £400.  That is, £2,200 plus £400 = £2,600.

I have laid out below how the missed RPI increase every 12 months would accrue  following an original order for maintenance.

So, by month 48 the arrears would be £1350.  This needs to be paid by John to bring the maintenance up to date.  If John refused, his ex could apply to the court to enforce the non-payment and ask the court to fix the payments at the correct level for month 48.   However, where there are arrears that are more than 12 months old, John’s ex would need to ask the court for permission to recover these older arrears.  John may ask the judge to remit (waive) the arrears older than 12 months.

In reality, the legal costs of going back to court would be prohibitive if there is no access to legal aid, and it would be stressful.  Better, surely, to fix the correct amount at month 48 so it is at the right level going forward and prevents any further arrears building up.  Then, the older arrears could be paid in a series of lump sums over the next year or 18 months.  So, divide the arrears by 12 or 18 and add on to the present monthly payments of maintenance.

Remember, if John and his ex are finding it hard to negotiate the precise way to get themselves back on track, they could consider a mediation session to help them get it sorted.  One session should do it.

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Child support and maintenance after divorce

March 16, 2012 in child maintenance, Enforcement, spousal maintenance, Variation maintenance by Alan Larkin | No comments

Who knows what the future holds?

My postbag continues to bulge with divorce enquiries focussing on child support issues and spousal maintenance.  The conclusion of a divorce does not, of course, mean the end of disputes or problems over child maintenance or the intepretation of family law court orders. Here is my most recent query:

Following a very messy and financially costly divorce, a court order was made that included a RPI increase at the insistance of the petitioner. The only alternative I had was to go througth a full court procedure which could have significantly increased the fees that at that point were spiralling out of control. The date of this increase is in effect from 20012 (this is the actual date on the court paper). My ex wife has not ‘reminded’ me about this probably because she is still being persued by her solicitor for the oustanding fees that she ran up during the divorce-since the divorce she has instructed other solicitors in an attempt to entangle me in more nonsense which I refuse to engage in. I normally direct the new solicitor to the original one where the fees remain oustanding and this tends to silence the correspondence for a while until a new instruction is generated.

I have and will pay the monthly child maintenance fees until my child reaches the age of 18 or until she leaves full time education as stipulated in the court order. It was my ex-wifes solicitor who drew up the order and maintenance payments will cease approximately 2018 but as stated the increase id documented as 20012-what are my options?

To begin with, I’m not sure whether the order referred to above contained spousal maintenance and child support (maintenance) or just child maintenance and this attracts the RPI increase.  But, no matter, since the principles remain the same for either order (with one exception I’ll return to below).

    • the order is made against the payor so it is enforceable in case of default.  I consider that this includes any failure to comply with an RPI increase ordered by the court (even if it was by consent).
    • the purpose of the order is two fold – an automatic increase in the maintenance each year prevents it losing its true value over a period of years and it makes it unncecessary for the parties to have to apply back to the court for a variation (at significant legal cost) in the amount being paid.

Your options

Carry on as you are. 

    1. But you know the increase is due and the defecit will build up.  You may (eventually) receive a solicitor’s letter asking for payment at the new level (and threatening enforcement).  If you ignore it and an application for enforcement is made, be very careful as you could end up on the wrong side of a costs order.  Especially if a judge decides it is not a case of ‘can’t pay’ but ‘won’t pay’.
    2. The application back to court could be for a variation of the amount of maintenance as well as enforcement.  Your ex may think you could afford to pay more and ask for the increased amount to be index linked as well.  If this happened you are entitled to ask the court to decrease the amount and it will be a question of fact as to whether the judge thinks the original amount under the order should go up or down, or remain the same.  It is possible for an attachment of earnings order to be made at the same time (if you are not self-employed) as a way of ensuring that the right amount is paid each month going forward.
    3. If, by the time your ex made an application to the court to enforce or vary, your arrears were more than 12 months old, your ex would have to ask permission from the court to recover any arrears older than 12 months.

Apply back to court yourself

If you are struggling to pay the original amount you could apply back to the court yourself to vary the amount downwards and ask the court to ‘remit’ (waive) any arrears that may have built up.

Or, just pay the new amount

You could calculate the increase in the maintenance , start paying it and have a quiet life.

I mentioned an exception above.  This is where the order is for child support/ maintenance.  This would only be in existence if you and your ex agreed to the order.  In the absence of agreement, the family court has no jurisdiction in child maintenance issues (with some further exceptions, I won’t mention here!).  In the absence of agreement, the CSA will deal.  It is possible for either party to an agreed child maintenance order in the family court to wait, to all intents and purposes, a period of 15 months from the date of the original order and then ask the CSA to take over so the family court will no longer deal with the child maintenance element.

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RPI variation of spousal maintenance in successive years

February 24, 2012 in child maintenance, spousal maintenance, Variation maintenance by Alan Larkin | No comments

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.

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Sample letter to vary periodical payments through RPI

September 2, 2011 in child maintenance, spousal maintenance, Template Letters, Variation maintenance by Alan Larkin | 1 comment

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.

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How to vary a divorce maintenance order through the RPI

June 22, 2011 in child maintenance, spousal maintenance, Variation maintenance by Alan Larkin | 3 comments

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.

 

 

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Maintenance: RPI or CPI?

May 7, 2011 in spousal maintenance, Variation maintenance by Alan Larkin | 1 comment

One of my learned colleagues at Family Law Partners, a Deputy District Judge, popped his head over the top of my computer screen recently and asked me for my views on linking maintenance payments to the Consumer Prices Index (CPI).  This got me to thinking: is there an advantage for my clients to have their payments linked to the CPI instead of my favoured link, the Retail Prices Index (RPI)?  See my earlier post on why lawyers link maintenance to inflationary measures in the first place.

 After all, the Chancellor  in his  June 2010 Budget announced the Government’s intention to use the CPI for the price indexation of benefits and tax credits from April 2011.  Previously it had used the RPI.  So is there a benefit to having one’s maintenance payments  linked to the CPI?  As usual, the answer is: it depends.  The fact that the Government has linked payments it has to make (like benefits) to CPI and the payments it likes to receive (like students’ loans) gives us a clue.  Look at the following graph.

RPI/CPI Comparison 2009 to 2011

 (Source: Office for National Statistics licensed under the Open Government Licence v.1.0)

 

This shows for the last 12 month period that CPI was 4.0 per cent and RPI was higher at  5.3 per cent.

Divorce Finance Toolkit’s conclusion: if you are paying maintenance you might want to follow the Government’s lead and ask your lawyer to link to CPI (lower) and if you are receiving maintenance then you should insist upon it being RPI (higher).

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