A spreadsheet can divide value precisely. It cannot necessarily divide risk fairly

With gilt yields at near two-decade highs, we look at what changing markets might mean for Wells sharing, mortgage capacity, pensions, Duxbury and valuations in financial remedy cases.

There has been increasing media coverage of the UK government bond market in recent weeks. The yield on 10-year gilts (UK government bonds, borrowing money from investors) has reached levels not seen for nearly two decades, increasing the cost at which the Government can borrow.

The UK is, of course, not alone. Most developed economies face higher borrowing costs due to geopolitical uncertainty, inflationary pressures and concerns about public finances. The UK, however, has one particular vulnerability which is that a quarter of its wholesale government debt is held in ‘index-linked’ gilts (i.e. the interest payments and principal on these bonds are linked to inflation). That part of the government debt therefore cannot simply be eroded through inflation in the same way as conventional fixed-rate debt.

Higher borrowing costs place pressure on the public finances and potentially increase the pressure for tax rises, spending cuts or other fiscal measures.

But what does any of this have to do with the division of assets upon divorce? A few things.

Financial remedy cases necessarily involve placing values on assets and liabilities.

Periods of economic uncertainty are a reminder that two assets worth the same amount today may expose their owners to very different risks tomorrow.

Sharing risk as well as value

The first issue, familiar to financial remedy practitioners, is Wells sharing.

The principle takes its name from Wells v Wells [2002] EWCA Civ 476. In broad terms, it recognises the potential unfairness of leaving one spouse holding assets whose future value is uncertain while the other receives assets of apparently equivalent value but with materially less risk.

That concern becomes particularly important during periods of market volatility.

The underlying question is whether fairness sometimes requires the parties to share risk as well as value.

A 50:50 division on a spreadsheet is not necessarily a 50:50 division of risk, where one party is to receive a copper-bottomed asset.

The Court of Appeal recently revisited Wells sharing in Culligan v Rosemin-Culligan [2026] EWCA Civ 948. The case concerned, among other things, the division of an illiquid private company shareholding. The Court of Appeal rejected the suggestion that Wells sharing should be regarded as a “last resort” or that it should necessarily comprise only a minority element of an award.

The important question remains fairness. In Culligan, this meant looking at whether the overall division achieved a fair balance of risk and illiquidity between the parties. The wife's contingent entitlement to the value of the private company holding was increased from 30% to 50%, so that the parties shared more equally both the potential reward and the risk attached to it.

Housing needs and mortgage capacity

The consequences of worsening economic conditions are not confined to high-value cases involving businesses and investment portfolios. They may be particularly important in cases turning on housing needs.

Higher government borrowing costs feed through into wider financing conditions including mortgage pricing. A mortgage-capacity assessment obtained several months earlier may therefore cease to provide a reliable picture of what a party can actually borrow and what repayments they can afford.

An outcome which appeared workable when Forms E were exchanged may look rather different by the time of an FDR or final hearing if borrowing costs have materially changed.

Where housing needs determine the outcome, apparently small movements in mortgage rates can potentially have significant consequences.

Pensions

Pensions provide another example of why headline values do not always tell the whole story.

Changes in gilt yields can affect different pension interests in different ways. They can influence bond values and annuity rates and may affect some of the assumptions underlying pension valuations.

The important point for financial remedy practitioners is not that rising gilt yields necessarily make a pension more or less valuable. It is that two pensions with apparently similar values can have very different economic characteristics.

That is particularly relevant where pension rights are being offset against other assets.

A pound of pension value is not necessarily economically equivalent to a pound of cash or property.

Periods of financial volatility therefore reinforce the importance of appropriate expert pension advice rather than assuming that the figures appearing on an asset schedule are directly interchangeable.

Duxbury and the illusion of precision

The gilt market also poses an interesting question about Duxbury calculations.

A Duxbury calculation necessarily rests upon assumptions about matters including inflation, taxation and investment returns. But what happens when the economic environment moves significantly while those assumptions remain unchanged?

A 5% gilt yield, for example, is not the same thing as a 5% real, risk-free return available to a recipient. Inflation and taxation matter, as does the need to preserve or amortise capital.

The broader point is perhaps more important. Financial remedy calculations can sometimes give an impression of mathematical precision when the underlying assumptions are necessarily predictions about an uncertain economic future.

Duxbury is, after all, a tool rather than a rule.

When Do Valuations Become Stale?

A final issue is timing.

Financial remedy litigation takes time. A Form E, property appraisal, pension valuation, business valuation, mortgage-capacity assessment or settlement proposal may be months old by the time the parties reach an FDR or final hearing.

In relatively stable economic conditions, that may matter little. In rapidly moving markets, it may matter considerably.

This does not mean that courts should attempt to predict the direction of bond markets, interest rates, property prices or investment markets. They cannot, and should not.

But courts and practitioners do need to be alive to whether the evidence on which a proposed settlement is based still reflects the parties' present economic circumstances.

Ultimately, financial remedy law is concerned with fairness, not simply arithmetic.

Current turbulence in the bond markets provides a reminder that the value placed against an asset on a spreadsheet is only part of the picture.

A spreadsheet can divide value precisely. It cannot necessarily divide risk fairly.