Posted by David Cobern on 21st October 2016

It has been twenty-four years since Consumer Price Inflation last topped 2% per annum. We have enjoyed an extraordinary period of stable prices. That is all set to change post-Brexit with the weakness in the pound. Consumer Price Inflation is predicted to move swiftly upwards in the coming months and years. For people with spousal and child maintenance orders made through the courts, this could seriously erode the purchasing power of the maintenance you receive or pay.

Maintenance and inflation

The standard maintenance order includes a variation clause which enables a calculation to be made every year on the anniversary of the order based on changes in the Consumer Prices Index (‘CPI’) during the preceding year. The index is published quarterly.  Because of the price stability we have enjoyed, many people with variation clauses in their maintenance orders have not bothered to make this calculation. There are others whose orders do not have a variation clause at all.

 

If you have a maintenance order, whether for yourself or your children and whether you are the recipient or the payer, now would be a good time to check the terms of the order for a variation clause and to carry out a calculation of the changes in the amount paid since the order was made. This is likely to become significant to you in the coming months and years as prices at the petrol pumps and checkouts creep upwards.

 

If your order does not include a variation clause, now might be a good time to take some advice about the future.

 

If child maintenance in your case has been assessed by the Child Support Agency (‘CSA’), bear in mind that under the new Child Maintenance Service (‘CMS’), a charging regime is being introduced for collecting maintenance under an assessment. As cases move from the CSA to the CMS the payer is expected to pay a collection charge and the recipient faces a deduction from maintenance recovered. In effect the government is incentivising you to make a private arrangement which can be on such terms as you think appropriate.

 

If you are negotiating a private arrangement (as many parents are doing), bear in mind what is likely to happen to the purchasing power of the pound in your pocket in the future. You can either choose to use the CMS ‘gross income formula’ with annual reviews which means maintenance is based on the payer’s actual income in the preceding year or you can agree on a monthly figure. In the latter case, you would be well-advised to provide a mechanism to take into account future inflation such as annual reviews by reference to the CPI.

The Family Law Company offers free consultations in which you can get no obligation, legal advice detailing the various options available to you. We also have several experienced mediators and collaborative lawyers, who can assist separating spouses in dealing with their financial arrangements.
If you require further information or advice in respect of any family matter please contact our solicitors in Exeter on 01392 421777

 

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