Capitalising maintenance: proposals for reform

The final report of the Duxbury Working Party was published on 25 November 2024 and makes several key recommendations that family law professionals and their clients need to be aware of when advising in relation to maintenance cases and where capitalisation is a potential outcome.

What is capitalised maintenance?

Instead of paying ongoing monthly support to a former spouse, (often called maintenance or periodical payments), in some cases it is preferable to pay a lump sum instead to achieve an immediate clean break. The lump sum is often calculated with reference to what are called the Duxbury tables.

How are Duxbury tables used?

Following the divorce of Mr and Mrs Duxbury in 1992, the Duxbury tables were designed to produce a lump sum for investment.

The lump sum is calculated with reference to various underlying assumptions. The aim is for it to be sufficient to enable the recipient spouse to receive an income from that investment, including drawing down on the capital, that is equivalent to regular maintenance payments.

What is wrong with the current Duxbury tables?

The Working Party, chaired by Lewis Marks KC and consisting of seven members, set out with the aim of assessing the Duxbury tables and their underlying assumptions, which have been criticised by family lawyers, financial advisers and the courts for making unrealistic assumptions about investment returns, inflation and capital growth, particularly for recipients who are cautious investors.

The Duxbury tables are, of course, intended to calculate the capital sum needed to generate a specific annual income for the recipient for life, based on factors such as life expectancy and investment returns. However, their use has often led to concerns that the funds provided may not be sufficient to maintain the recipient’s intended lifestyle, particularly when recipients are typically less financially sophisticated. Additionally, the use of life expectancy as a default assumption, along with the inclusion of the state pension, has created discrepancies in the fairness of outcomes.

Recommendations

In response to these issues, the Working Party has made several key recommendations:

1. The underlying assumptions of 3% income yield, 3.75% capital growth and 3% inflation remain appropriate, but management charges, (1% for funds under £1m, 0.5% for funds over £1m), should be included in the calculation
2. The calculation should no longer default to life expectancy. Courts should instead consider the likely duration of the periodical payments being capitalised.
3. Whole-life calculations should only be used in rare cases where the recipient’s life expectancy is significant.
4. The State Pension should not automatically be included in the calculations, though it may affect the amount of periodical payments.
5. Separate tables for male and female recipients are no longer necessary, given the equalisation of State Pension age.
6. Legal advisers should ensure clients understand the limitations of Duxbury-based awards and avoid unrealistic expectations about guaranteed levels of expenditure.

The report acknowledges that these recommendations, particularly regarding management charges and the State Pension, may increase capital sums awarded. However, these increases are expected to be offset by the more accurate duration-based calculations.

Although the report’s recommendations are not binding, the provisional report has already been referenced in WW v XX [2024] EWFC 33, in which HHJ Hess stated:

“it is not obvious in any event that we should be looking at a whole life Duxbury fund anyway for somebody who is aged 38 (see the latest thoughts, for example, set out very recently in the interim report of the Duxbury Working Party).”

There is no detail yet on when revised Duxbury tables will be available and we will update you as and when more information is made available.

For more details, the full report can be accessed here.