Duxbury gets a Refresh

The final report of the Duxbury Working Party was published on 25 November 2024, and sets out the findings of the committee comprised of Lewis Marks KC (Chair), Sir Nicholas Mostyn, Joseph Rainer, Sarah Hoskinson, Michael Allum, Simon Bruce, and Mary Waring. The purpose of the report was to conduct a review of the Duxbury tables, and their underlying assumptions. They have been the foundation of capitalised spousal maintenance on divorce for the last 40 years, and have remained largely unchanged since their introduction in the mid-1980s. The tables have however been often criticised by family lawyers, financial advisers, and at times even the courts, on the basis that the assumptions produce an income which would not in fact be achievable in the market, particularly if the recipient is a “cautious investor”. 

The expanded Duxbury Working Party has therefore undertaken an independent analysis and review of the calculations and assumptions and has made a set of recommendations aimed at family courts, and has produced new tables for lawyers and judges to use.

Duxbury Tables and Criticisms

The Duxbury tables, in short, calculate the capital sum a recipient requires to provide a certain level of annual income, historically, for the rest of their life (based on actuarial life expectancy), and are based on a series of assumptions as to the rate investment return, inflation, capital growth, life expectancy and full state pension receipt by the recipient. Whilst the court has said that they are a “tool not a rule”, family lawyers often find that it is extremely difficult to persuade the court to deviate from using them.

The criticisms by family practitioners and financial professionals over the years have been as follows:

• The sums generated by the tables are not sufficient to provide the level of spending power intended for the lifetime of the recipient, and, therefore, it is often seen as unlikely that the recipient of a Duxbury fund will be able to invest their fund so as to enable them to spend at the rate the tables assume.
• They are based on the recipient needing an income stream for their whole life, which is now out of kilter with the approach of the courts, where maintenance on a joint lives basis is now very uncommon.
• Recipients of Duxbury funds are likely to be more cautious than adventurous investors, as they would generally not be financially sophisticated. This places the risk on the payees (predominantly women) for the benefit of the payers (predominantly men), meaning they often have to reduce their expenditure later in life.

Findings of the Duxbury Working Party

In order to address the purported deficiencies with Duxbury, the report sets out seven main conclusions:

1. Whilst the existing underlying assumptions as to income yield (3%), capital growth (3.75%) and inflation (3%), remain essentially sound, for the reasons of balance risk between the parties to achieve a fair outcome.
2. However, the calculation should also include an allowance for the management charges (1% for funds up to £1m, 0.5% for funds above £1m) likely to be incurred on the investment of the fund.
3. The calculation should no longer default to the life expectancy of the recipient (although there will be some cases in which that is appropriate). The court should instead consider the likely duration of the periodical payments order which is being capitalised, and apply that period to the quantum of the periodical payments that is being capitalised.
4. Where whole-of-life is determined to be the appropriate duration for the calculation, extreme caution should be exercised in undertaking a Duxbury calculation for any payee whose life expectancy is less than about 15 years, although the Working Party thinks that these will be very rare cases.
5. The computation should no longer default to the inclusion of the State Pension, given it is no longer possible to substitute one party’s NIC record for the other’s on divorce, although the fact of such entitlement may impact on the quantum of the periodical payments being capitalised.
6. It is neither necessary nor appropriate (where the appropriate duration for the calculation is a term of years and as State Pension age is now the same for men and women) to have separate tables for male and female recipients.
7. Legal advisers to parties who are receiving Duxbury based awards, or awards with a Duxbury component, should ensure that their clients have a proper understanding of the basis of the calculation and disabuse them of the erroneous belief that it ensures a particular level of expenditure for a particular period.

The report acknowledges that its recommendations in relation to management charges and State Pension will tend to increase awards, however it is anticipated that in practice this will be mitigated, and sometimes outweighed, by the adoption of the recommendation for a lesser duration than life expectancy in most cases.

The report sets out recommendations only, and acknowledges that it will be for the court to decide whether to adopt those. However, over a month before the final report was published, the recommendations of the provisional report were cited and followed 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).”

Conclusions

It is hoped that the conclusions contained in the report, if followed by the courts, will bring the Duxbury tables more into line with the actual principles applied by the courts in cases involving spousal maintenance. The primary recommendation, ie that the calculation should no longer default to the life expectancy of the recipient, in particular, will end the decades old inequity whereby the recipient of maintenance would in some cases essentially receive maintenance for a much longer period than they otherwise might have, purely due to the choice to achieve a clean break by way of a Duxbury lump sum, rather than ongoing periodical payments.

It remains to be seen to what extent the findings of the report will be followed, however the early indication from the courts, Resolution and family practitioners, is that they represent long overdue change.

A link to the full report of the Duxbury Working Party can be found here – https://financialremediesjournal.com/content/report-of-the-duxbury-working-party-final-november-2024.a10bde88c0eb414c96e08b61f2c4ec27.htm

Article by Michael Finnegan, Senior Associate and Sarah Hoskinson, Partner, Burges Salmon LLP (and member of the Duxbury Working Party).