Limited time left for overseas divorces involving UK pensions
12th October, 2020
The UK has left the European Union albeit the transition period runs until 31 December 2020. Unless anything is agreed to the contrary, at the end of the transition period, much of the EU legislation will no longer be applicable law in the UK.
This is likely to leave a gap in the law and may leave couples who now live abroad unable to share a UK-based pension, potentially leading to great unfairness for the weaker financial party.
How pension sharing works
In England and Wales, the courts are able to make an order requiring the trustees of a pension scheme to transfer a percentage of a member’s pension to a pension scheme in their (soon to be) ex-spouse’s / ex-civil partner’s name. That pension then belongs to the ex-partner / ex-civil partner for them to invest or use as they please.
A UK based pension scheme will require a pension sharing order made by the courts of England and Wales before it will implement a pension share.
If a couple is going through divorce proceedings in a different jurisdiction and that court makes an order requiring a UK-based pension to be shared, they are likely to discover that the UK pension scheme declines to implement the pension share and instead insists upon there being a Pension Sharing Order made by a court in England and Wales.
Under domestic law, the courts in England and Wales are able to make financial orders following an overseas divorce (including a pension sharing order) but only if it has jurisdiction to make such an order. Under domestic law, the court has jurisdiction to make such financial orders if:
- Either party was “domiciled” in England and Wales at the date the application was made or the date of the overseas divorce;
- Either party was “habitually resident” in England and Wales throughout the period of one year ending on the date the application to the court was made or the overseas divorce took effect; or
- Either party owns or has an interest in a home in England and Wales (although this ground alone cannot be relied on in pension cases).
It follows therefore that if the parties were only temporarily in England and Wales or left England and Wales some time ago to live elsewhere, domestic law would not assist them and they may struggle to get a court to entertain their application for a pension sharing order, even if it has been ordered by an overseas court. This may mean that they are unable to share the pension as they or the overseas court had intended.
When couple are unable to get an order under domestic law, a piece of EU legislation known as the EU Maintenance Regulation has often come to the rescue. Whilst it is an EU law it can be used for cases originating outside the European Union. The regulation allows the court to make orders relating to maintenance but “maintenance” has a broad definition and under certain circumstances, this can include a pension sharing order.
The regulation also introduces a further ground for jurisdiction namely the forum of necessity. This means that when no other EU state is able to make the order sought and it is necessary for a particular state to assume jurisdiction, that particular state has jurisdiction to make a maintenance order. As a pension sharing order relating to a pension in England and Wales can only be made by a court in England and Wales, this ground often allows the court to hear the application and in the right circumstances, make a pension sharing order, even though the parties no longer live in England and Wales.
The end of the transition period
The maintenance regulation remains applicable law in England and Wales and can be relied upon for applications started before the end of the transition period. Accordingly if it appears that the implementation of a pension share on a UK pension following an overseas divorce is likely to be an issue, there is a short window of opportunity to start an application before the end of the transition period. After this, sharing UK based pensions under an overseas order is likely to be more problematic and, in some circumstances, impossible.
For further information, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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