International Pension Issues on Divorce

 

In this blog Director Charlotte Symes examines how and in what circumstances an English pension pot can be split when a couple divorce overseas.

Many international couples spend time living and working in England and by doing so they contribute to an English pension scheme. Often such couples will then get divorced overseas. The pension pot is often one of the most significant assets. Treatment of an English pension on divorce is not always straightforward because it is not possible to share an English pension without an order of the English court. It is therefore important for the spouses to seek English legal advice as early as possible in the overseas proceedings. Here are some key reasons why:

1. At the very outset it needs to be determined whether the applicant (seeking an interest in the English pension) can make the relevant application in England for a pension sharing order. The criteria for the English courts to have jurisdiction is discussed below; and

2. It is helpful if the overseas order sets out the terms of how the pension is to be divided as well as which party will make the relevant application to the English court, by when, and who is to pay the costs. This means that the application in England can be made by consent, which expedites the process. In England the pension share must refer to a percentage, which may not be the default position abroad (i.e. it could be by reference to a fixed sum).

The application for an English pension sharing order must be made in accordance with Part III of Matrimonial and Family Proceedings Act 1984 (MFPA), which permits an application to be made for financial relief in England and Wales after a divorce overseas. Having an English pension does not automatically mean the court has jurisdiction to make a pension sharing order. Any applicant must have not remarried (section 12(2) and must meet the following criteria:

Section 15(1): either of the parties must:

1. Be domiciled in England on the date of the application for leave or be so domiciled on the date on which the divorce took effect in the overseas country;
2. Be habitually resident in England for the period of one year ending with the date of the application for leave or for the period of one year ending with the date on which the divorce took effect in the overseas country; or
3. Have a beneficial interest in a matrimonial home in England at the date of the application for leave.

What if you cannot prove any connection to England?

Establishing the required connection to England can be hard to prove for those who spent a limited but pension wise, lucrative, time in England, before moving to another country. Therefore, it is essential to take local advice at the time of the divorce and before any final order in relation to finances is made. It may not be possible to obtain an English pension sharing order in relation to an English pension and in that circumstance, alternative options will need to be considered, such as offsetting entitlement to a spouse’s pension against other pension or non-pension assets. Offsetting can be a complicated exercise to ensure a fair comparison of the value of different asset classes and it is important to seek expert advice before agreeing to an offset as part of a financial settlement.

Having established jurisdiction – what happens next?

If a successful Part III application is made, the court has the power to make orders for all the financial remedies available on a traditional application under Part II for financial relief on divorce.

The Part III application must be made using the procedure set out in Part 18 Family Procedure Rules 2010 (FPR) and it involves:

1. An application for leave of the court to make the application. Section 13(1) MFPA states leave can only be obtained where there is a substantial ground for the making of an application; and

2. A substantive application for financial relief. Section 16 MFPA states that it must be established that it would have been appropriate for such an order to be made by a court in England and Wales, having regard to statutory criteria.

As discussed above, where the drafting of the overseas order anticipates the application for an English pension sharing order, the Part III application can be made by the consent of both parties. If made by consent, rule 9.26 FPR confirms that applications (1) and (2) above can be made at the same time. The following documents must be filed at court:

• Form 50E: application for permission;
• Form 50F: application for financial relief;
• Two copies of a draft order (both granting permission and ordering the pension share itself), one which must be signed by both parties and their solicitors where applicable;
• The relevant pension annex;
• Applicant’s statement in support (this must explain how the criteria at section 16 MPFPA are being met); and
• The court fee.

If the Part III application is contested, an application for permission to the court must be made in the first instance.

If a Part III application is not possible, there are may be alternatives. For example, the pension asset could be offset against other assets, if available, or it may be possible to transfer the English pension to an overseas pension that could then be divided by the relevant overseas process. Local advice should be sought.

English divorce and foreign pensions

The issues discussed in this article also need to be considered in the reciprocal situation of an English divorce where a spouse has a pension interest overseas. The current position, as concluded by Mostyn J in Goyal v Goyal (No. 3) [2017] EWFC 1, is that the courts of England and Wales do not have the power to make a pension sharing order in respect of an offshore pension scheme. The existence of an overseas scheme will, however, be a relevant factor when the court exercises its powers and discretion in making a financial order under the Matrimonial Causes Act 1973. Where there is an English divorce and a spouse a pension overseas, it is important to seek local advice in that country as to how and if the English pension can be shared; that includes evidence as to whether an English pension sharing order would be recognised overseas.