Family & Relationship Law 25 May 2022

Treatment of ‘non-commutable’ pensions in family law proceedings and double dipping: Mayhew & Fairweather [2022] FedCFamC1A 53

Non-commutable pensions arise in family law matters frequently, however, the character of the non-commutable pension may vary and this often raises complexity with respect to the valuation and treatment of the pension.  For example, some non-commutable defined benefit pensions may be commutable if the income stream is a complying market linked pensions (Term allocated pensions) or a retail complying annuities, and as a further example, judicial pensions are different from defence/military pensions.

As a starting position, parties to a family law proceeding should make enquiries as to whether the pension is capable of valuation.  If so, this may be undertaken pursuant to the single expert rules provisioned in the Federal Circuit & Family Law Rules 2021.  The valuation report should address the valuation methodology including evidence as to what the valuer had taken into account when reaching their opinion as to the capital value.  This will likely include the factors relied on that reflect the capitalisation rate, and perhaps, matters that were not relied upon.

Understanding the character of the pension and the factors relied upon to form the opinion are critical to advancing arguments in relation to the capital value of the non-commutable pension, and whether there is room to argue further matters under s 75(2) or (90SF(3).  Accordingly, depending on the nature of the non-commutable pension, it is possible to include its capital value in the property pool, as well as to seek to have a particular quality of the pension regarded under s 75(2) if not relied upon to capitalise its value.  It is possible for the court to perform this exercise without ‘double dipping’.  To illustrate, in Semperton v Semperton [2012] FamCAFC 132; (2012) 47 Fam LR 626, the court held that “where the nature of the property to be retained by one of the parties has a quality about it which is not accurately reflected in the value ascribed” then it may be legitimate to take that into account under s 75(2)(b) (at [146]), and likewise if “there was some aspect of the entitlement that had not already been taken into account when assigning it a value” (at [148]).

In the recent decision of Mayhew & Fairweather [2022] FedCFamC1A 53, the Full Court examined, among other grounds of appeal, whether:

His Honour erred in the manner in which he approached the treatment of the capitalised value of the husband’s pension and in addition erred in assessing the wife’s Section 75(2) adjustment arising from the husband’s pension.

In Mayhew the parties agreed on the capitalised notional value of the non-commutable pension, but there was no evidence in relation to the valuation methodology.  The primary judge included the agreed value in the property pool.  The primary judge also took the pension into account when considering factors under s 75(2).  The primary judge, relying on Semperton, took the following matters into account under s 75(2):

(a)        the husband’s income stream from his pension;

(b)        that it is not taxable;

(c)        that the pension is not capital; and

(d)        that compared to 2018, the weekly sum payable has increased.

The Full Court held that by the primary judge, having regard to the above factors under s 75(2) such as the ‘assurance’ of the pension and the income stream, had ‘double dipped’ (had regard to the same matters twice).  The ‘double dipping’ had occurred through the failure to present the evidence as to what had been taken into account when reaching the agreed value. For example, the Full Court held that it was almost inconceivable the ‘assurance’ of the pension was not taken into account in the capitalisation of the pension, and there was no evidence to say it had not.  Hence, only on the presentation of methodology of the valuation could the court make conclusions in relation to matters under s 75(2) stemming from the pension.


If you have queries about the treatment of a pension (whether non-commutable or otherwise) such as a defined benefit schemes in your family law matter, please contact Matthew Beckmans for a 30 minute no cost consultation to provide you with tailored advice in relation to you and your individual circumstances.  Our lawyers continue to work remotely and are available for telephone and Skype/ Zoom appointments.  Our Family & Relationship Law team is here to help you navigate difficult issues during these difficult and unprecedented times.

Matthew Beckmans.
Matthew Beckmans Senior Lawyer Family & Relationship Law View profile
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