Rising inflation and existing spousal and child maintenance orders
Now is a good time for those with existing maintenance orders to check the terms of their financial order.
With the Bank of England forecasting that inflation will continue to rise this year and the cost of living crisis putting a significant strain on many families’ finances, it is a good time for those with existing maintenance orders to check the terms of their financial order and understand how this change in the economy may affect them.
What is a spousal maintenance order?
Spousal maintenance orders made on divorce require a party to pay ongoing regular sums (usually on a monthly basis) to their ex-spouse. They are made when a party does not have enough income to meet their ongoing expenditure needs and the paying party has sufficient surplus income to make this affordable for them. They are generally made to last for a specific period of time (fixed term) but can extend for the remainder of the parties’ lives (known as a joint lives order).
Will spousal maintenance payments go up as a result of the rising inflation rates?
This depends upon your financial order and whether or not it specifies that maintenance payments are “index-linked” and to be reviewed on a yearly basis. Each order is different, and it is important that you carefully check and understand your order so that you fairly receive what you are due or if you are the payor there are no surprises you may not be aware about. Many orders for spousal maintenance provide a system of increase and how that should be calculated, the annual variation tends to be tied to the Consumer Price Index (CPI) or the Retail Price Index (RPI).
What should the receiving party do?
You should check the financial order very carefully and in particular whether maintenance payments are “index-linked”. If they are and you wish to revisit the payments made, you will need to carry out a calculation to assess what the new payment should be. You can find a calculator online or seek legal assistance with the calculation.
It is good practice for you to provide your ex-spouse with the new calculation in readiness of the payment date. If you both overlook the recalculation, you can claim the ‘arrears’ at a later date, but bear in mind that there is a risk that the court may take the view that you should not recover them if you leave it too long, and your ex-spouse challenges the figure or makes an application to vary the amount paid downwards.
If your ex-spouse does not pay spousal maintenance at the new rate calculated and has not made an application to vary the order, arrears will build up but please remember that it is important that you seek early legal advice if this happens as the ability to recoup maintenance arrears over 12 months old is limited.
What should the paying party do?
You are bound by the financial order to pay the revised amount and not doing so will leave you in breach of the order. If you are in doubt about what the financial order says or means for you, you should seek independent legal advice. If you do not comply with an order to pay maintenance, you will be liable for the arrears and your ex-spouse may initiate enforcement proceedings for those arrears.
It may be that the indexation of the maintenance has made it unaffordable, with your income failing to rise with inflation. If the payments become unaffordable try to open a dialogue with your ex-spouse and consider mediation or arbitration to provide for a non-court dispute resolution process which will be quicker and cheaper than contested proceedings. If you are unable to reach an agreement, however, or your ex-spouse is being unreasonable, a court application for a variation may be your only option. It is always important that you seek legal advice.
What if we are currently in the process of negotiating a financial settlement?
If spousal maintenance is likely to be within your financial order, you should give serious consideration as to whether there should be an indexation clause included in the order. You should discuss this with your legal advisor.
Can spousal maintenance orders be changed?
Unlike capital orders for lump sums, transfers of properties or pension sharing orders which are one-off orders that cannot later be changed, spousal maintenance orders are variable. That means that the amount to be paid can be reduced or increased, the term for payment can be increased or decreased, or the order can be terminated. The only caveat to this is if there is a section 28(1)(a) Matrimonial Causes Act 1973 bar, which prevents the receiving spouse from applying to extend the fixed term that maintenance is payable for, but it does not prevent either party from applying to the court during the term to vary the amount paid.
What factors are taken into account when varying an order?
On a variation application, the court will consider all of the circumstances of a case. One of the key factors will be the ability of the paying party to continue to make payments, have those “index-linked” increases made the amount unaffordable to the payor? Does the amount of maintenance meet the needs of the recipient? The court will look at whether the order that was originally made continues to be fit for the purpose it was intended. It is important to remember that circumstances change and the legal position in respect of maintenance has changed over the years with an increased focus on a transition to independence and a clean break.
A variation of maintenance order can be varied both upwards and downwards, in some circumstances it may seek the need for maintenance taken away completely and therefore seeking legal advice on the merits of such an application is crucial.
What happens with child maintenance?
Child maintenance is different to spousal maintenance and is not measured against the various inflation and price indices if it is regulated by the Child Maintenance Service. The Child Maintenance Service take into consideration the paying party’s income. Therefore, if this does not change, there will not be a change to maintenance besides if the children spend more or less time with that parent. If the paying party’s wages rise with inflation, there will need to be a re-assessment of child maintenance.
If child maintenance is funded via a court order, legal advice should be taken, as it may be advantageous to one or both parties for it to be replaced by a Child Maintenance Service assessment after 12 months.
If you need family law advice, contact our family law solicitors. We offer a free 30 minute consultation.