Pensions are complicated and they can be amongst a divorcing couple’s most valuable assets. The law offers a variety of ways of dealing with them to ensure that there is a fair division of assets and that both parties’ needs – both now and in retirement – are met.
The situation is even more complicated when a pension arrangement is located in a different country from where the couple in question now live.
UK pensions and overseas court orders
When someone relocates abroad, they may leave behind them a UK pension arrangement. Alternatively a non-UK resident may relocate here to work for a period, build up a pension but then return to their original country or move on elsewhere. There are various mechanisms for moving a UK pension to another country on which specialist financial advice should be taken. However, not everyone chooses to do this or there may be reasons why this route is not suitable for them.
If a person with UK pension rights gets divorced overseas, the UK pension arrangement will not recognise an order of a foreign court that divides their pension, even if this is what both parties want. There are various solutions to this problem:
- If the divorce has not yet begun, talk to a specialist family lawyer here and overseas to see in which country – including England and Wales – it would be most advantageous for the divorce to take place. The answer may not be the same for each party to the marriage or civil partnership as different countries’ laws may be better or worse for a given individual. It is not the case that all British nationals will be best served by getting divorced here; it just depends on their unique circumstances. You may need to act very quickly because once divorce proceedings have started in one country it may be impossible or very difficult to go ahead in another.
- Even if the divorce proceedings have started, take advice from an English family lawyer to assess whether the proceedings can or should be taking place here.
- Could the pension be relocated in a tax-efficient manner to the country in which the divorce is taking place and then divided by the courts there? Specialist tax and financial advice is a must.
- Are there other assets that could be divided or transferred instead of the pension? This is known in England and Wales as offsetting. As pensions are a complex asset to value, good quality professional advice is essential to ensure that the offset represents a fair outcome.
- Get an English court order dealing only with any pensions located here.
Financial orders after overseas divorce
Part III of the Matrimonial and Family Proceedings Act 1984 allows a person who has been divorced overseas to get an order for financial provision in England, provided certain conditions are fulfilled.
The applicant (person asking for the order) must not have re-married or formed a subsequent civil partnership. They must also establish that the court has jurisdiction to hear their application (the ability to deal with a case). This will rest on the strength of their connection with England and Wales. This can be shown in a variety of different ways and it may not be cut and dried. Whether or not the court actually makes financial provision for the applicant depends on a whole host of discretionary factors, including what provision – if any – was or is available to them in the country where the divorce took place.
The requirement to establish jurisdiction can present a problem for parties who have no relevant connection with England and Wales, other than the existence of a pension here. However, all is not lost. Using a combination of EU and UK law, it is possible to establish jurisdiction on the basis of forum of necessity. Essentially, the English courts will deal with the pension issue because no other country’s courts can, due to the fact that a UK pension scheme cannot implement a foreign court order. This provision will survive the UK’s exit from the EU on 31 January 2020 but the long term position after the transition period is not yet clear.
There are various technicalities that need to be observed to make sure that the English courts will accept the application and that any pension order is fit for purpose as far as the UK pension scheme is concerned.
Overseas pensions and UK court orders
The exact reverse of this situation can arise. As a matter of law, English court orders cannot be made in respect of foreign pension arrangements. Therefore if you are thinking about getting divorced here, consider:
- Whether it would be better to get divorced in another country. The answer may be yes for one party to the marriage and no for the other. Take early specialist advice as the situation can change very quickly.
- Is offsetting, properly carried out, an option to avoid the need for a pension order?
- Can the pensions be moved without undue charges or tax disadvantages?
- Does the country in which any pensions are located have a procedure for making court orders after a foreign divorce that mirrors the Matrimonial and Family Proceedings Act 1984?
- Does the relevant country have other provisions available to divorcing couples with pension assets? For example, some countries allow pensions to be split by consent upon divorce.