Charlotte Lanning, a specialist family lawyer and associate solicitor at Edwards Family Law, outlines the factors that determine spousal maintenance payments and offers guidance on navigating changes in the face of ever-increasing living costs.

Courts in England and Wales can make various financial orders with regard to divorce. The three primary categories that such orders concern are:

• capital (ie, to purchase a home);
• income/maintenance (ie, to meet day-to-day living costs); and
• pension-sharing (ie, to meet day-to-day living costs in retirement).

If there are sufficient resources to meet both parties’ capital and income needs, matrimonial property will be divided equally as a starting point. If an equal division will not meet both parties’ needs, there can be a departure from such equality. Further, the court may utilise non-matrimonial property (such as inheritance, or funds acquired post-separation or prior to the marriage) to meet needs, if so required.

If the parties have children, child maintenance will always be payable by the party who spends less time with the child(ren). If a party is earning GBP156,000 or less, the amount of child maintenance is calculated using the Child Maintenance Service (CMS) formula. This is based on the paying party’s gross income and the amount of overnight contact that they have with the child(ren). Judges typically extrapolate and apply the same formula for incomes of more than GBP156,000; however, specific advice should be sought in these circumstances.

When Must One Party Pay Spousal Maintenance?

However, if the financially weaker party still does not have sufficient financial provision to meet their day-to-day needs after factoring in child maintenance as forming part of a parties’ income, they may be entitled to spousal maintenance. This is subject to whether the paying party has a surplus from their income after meeting their own needs.

The various financial orders are interlinked and complementary. An order for maintenance may end when the parties’ children reach the age of majority or conclude tertiary education, thereby reducing the recipient’s income needs and perhaps allowing them to downsize and release capital to supplement their income position.

“Spousal maintenance is always variable, which allows the court to revisit the order if either party faces a significant change in their financial circumstances.”

Similarly, as parties approach retirement, any maintenance provision is likely be for a limited period and ceases at the point when any pensions can be drawn down.

All parties are expected to maximise their earning capacity, even if they have been out of the work for a long time. The court will be realistic about what a party can earn based on their qualifications, previous income, and childcare responsibilities. Therefore, a court will only order one party to pay spousal maintenance to the other if:

• there is insufficient capital; or
• one party is incapable of earning enough to meet their income needs.

Spousal maintenance is always variable, which allows the court to revisit the order made if either of the parties faces a significant change in their financial circumstances, including – but not limited to – redundancies or, indeed, promotions. This prevents parties from being “trapped” by an order that they cannot afford but, equally, dissuades them from misrepresenting their income position (ie, downplaying their earning potential).

What Impact Does Inflation Have on Spousal Maintenance Payments?

A common feature of these orders is that they are often index-linked. This ensures that the payments keep up with the pace of inflation. The following three indexation rates commonly used.

• Consumer Price Index (CPI) measures the average change from month to month in the prices of goods and services purchased by most households in the UK.
• Retail Price Index (RPI) measures the average change in prices of goods and services purchased by most households in the UK – however, crucially, it also includes mortgage interest, council tax and other housing costs not included within the CPI.
• RPI All Items Excl Mortgage Interest (RPIX) is the same as RPI, apart from mortgage interest payments – therefore, it is closer to CPI (albeit still slightly different).

The most appropriate indexation rate to apply will depend on what the receiving party primarily requires the maintenance for. If the receiving party has a mortgage, it is essential that the spousal maintenance is RPI-linked to insure against any drastic changes to repayments (such as the ones seen in 2022). If a party owns a property outright, CPI or RPIX are likely to be more appropriate. Child maintenance will typically be CPI-linked because it relates to general costs, as opposed to mortgage interest payments.

“Salaries have not increased in line with inflation, and the huge wave of strikes faced by the UK in 2023 is testament to that.”

Where there is a lengthy term of maintenance, the inflationary uplift can be significant. There were huge upward variations in maintenance during the last few months of 2022. A monthly payment of GBP6,000 ordered in 2012 will now be more than GBP8,000. In previous years, the annual increase would have been a few hundred pounds per calendar month at most. Over the past year (2022), this sum has jumped up by almost GBP1,000 per calendar month – and, arguably, rightly so.

The court will typically order that any spousal maintenance award is index-linked. There is relatively little scope for negotiation on this point, and the recent spike in living costs demonstrates why it is so essential to factor this into any agreement.

How Can Spousal Maintenance Survive the Cost of Living Crisis? 

Nonetheless, it is commonly accepted that salaries have not increased in line with inflation, and the huge wave of strikes faced by the UK as the country enters 2023 is testament to that. Although the court’s starting point is to apply an increase in line with the order, there may be an oncoming wave of applications to vary quantum of maintenance downwards if the paying party simply cannot afford the uplift in line with inflation (or any uplift at all).

The best way to compromise this issue and avoid a costly court application for enforcement or variation of the order is to suggest an uplift that is perhaps a middle ground and affordable for the paying party in the longer term. Evidence should be provided to demonstrate why the payer cannot afford the uplift pursuant to the order – for example, confirmation of any increase to their income (by way of a letter from their employer or accountant), along with a budget setting out the paying party’s monthly costs.

The outcome of these applications is likely to be uncertain and it is always best to seek early legal advice to try and reach an agreement where at all possible. The costs of pursuing such an application can easily outweigh any financial gain, and there is no guarantee that either party will be successful – nor that they will be awarded the costs of their application if sought.