AVCs reduce child support liability

The child maintenance battle between the non-resident parent (NRP) who wishes to pay as little as possible and the parent with care who wants the NRP to pay as much as possible has raged since time immemorial. One of the main battlegrounds, as we have seen recently, has concerned the issue of the amount of the NRP’s income that should be taken into account when determining how much child maintenance he or she should have to pay.

The latest reported example arose in the Upper Tribunal decision JM v Secretary of State for Work and Pensions & Another (Child support : calculation of income). The question here was whether the father was entitled to have his additional voluntary contributions (AVCs) towards his pension deducted in full from his income when calculating his child support liability.

As the judge stated, the mother’s main argument was straightforward. The couple were married for 18 years. She said that throughout that time the father was paying eight per cent in compulsory occupational pension contributions and a further six per cent on his gross pay by way of AVCs. After they separated, the father substantially increased his AVCs to 25 per cent and the Child Support Agency (CSA) should not have deducted them in full, as they were at an unreasonably high level. She further argued that they amounted to a “diversion of income” under the rules relating to child support variations.

The father, on the other hand, claimed that he had informed the CSA of the level of his AVCs he was paying, but that the agency had failed to take them into account when assessing how much child support he should pay.

The First-tier Tribunal’s decision was clear. The CSA had been informed of the level of the AVCs the father was paying, and the regulations gave no discretion to consider whether they were set at a reasonable level. Accordingly, the CSA were ordered to re-assess the maintenance calculations to take account of the full amount of the AVCs, going back to November 2008. The mother appealed against this decision to the Upper Tribunal.

The Upper Tribunal’s decision was equally clear: the First-tier Tribunal had been correct. There was no discretion to consider whether the AVCs were set at a reasonable level and accordingly the First-tier Tribunal decision stands.

All of which would appear to suggest that an NRP can reduce their child support liability by as much as they wish, simply by increasing the amount of their AVCs. However, there is also the mother’s second argument: that the level of the AVCs amounted to a diversion of income. Unfortunately for her in this case, she was not able to run that argument, as a variation application cannot be backdated (although she may have a case against the CSA that she has suffered loss as a result of their maladministration).

The Upper Tribunal judge does not give an opinion as to whether a variation application would have been successful in this case. For example, he said, the father would almost certainly have argued that he was unlikely to work until the standard pensionable age and would not have been able to make proper provision for his retirement in the absence of this level of AVCs. The matter of whether pension contributions are reasonable has previously been considered by the Upper Tribunal in DW v CMEC, in which the judge set out a list of factors that may be relevant, such as the age of the individual, their reasonable retirement age and what advice, if any, they have received as to the level of contributions.

So it is not clear whether the mother’s variation argument would have succeeded. What is clear, however, is that such arguments over the amount of the NRP’s available income will continue to rage.

The full report of JM v Secretary of State for Work and Pensions & Another can be read here.