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Overseas Pensions and Divorce

View profile for Layla Babadi
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Pensions can, for many separating couples, make up a significant proportion of family assets and should be fully considered when financial matters are dealt with during a divorce. Where a couple with UK pensions divorce in England, the court can make various orders to deal with them. Most commonly, a pension sharing order is made. This is an order where a percentage of one party’s pension is given to the other party. However, where there are pension assets overseas or a divorce overseas and pension assets in the UK, the situation becomes complex. There are two angles that may need to be considered:

  • Can an overseas pension be shared in a divorce in England & Wales; and
  • Can a UK pension be shared in an overseas divorce.

It was confirmed by Mostyn J in the case of Goyal v Goyal [2016] EWFC 50 (Fam) that just as a UK pension cannot be shared without an order from our court, the English court does not have jurisdiction to make pension sharing orders in relation to offshore pensions, that is unless there is compelling evidence that a pension sharing order would be implemented in that country. 

The problem that this creates is that the only way of dealing with a pension is by way of offsetting; - that is where the non-pension owning party receives more of the non-pension assets to compensate them. There are however difficulties with this; - the pension owning party may then end up with a disproportionate amount of pension assets and not be able to access them until say retirement age is reached or the other party may not have any retirement provision.

It is essential to seek advice in the jurisdiction where the pension is held. It is important to find out what could be done in that jurisdiction with the pension on divorce and whether they would accept and implement an English pension sharing order. It may be that it is possible to obtain a local order which is equivalent to a pension sharing order. If that is the case, as set out in the case of Goyal, it is important that any English order includes an agreement that the parties will obtain a local order to implement the pension order agreed, and there will need to be undertakings that all parties will cooperate and take the necessary steps in that country to get the order.

But what about when the divorce is overseas, but the pension is in England? for example where a US divorce has dealt with a UK pension, and it now needs to be implemented. It is crucial to consider this before the overseas divorce is concluded because, post Brexit, the only way that this can be done is by applying for financial provision after an overseas divorce under Part III of the Matrimonial and Family Proceedings Act 1984.

Under a Part III claim the applicant must meet jurisdictional criteria – which is that they or the other party were domiciled in England and Wales at the time of the divorce or application, or habitually resident here for the preceding twelve months. It is also necessary that the applicant has not remarried. Where the criteria is satisfied, permission to apply needs to be obtained from the court.

Dealing with pensions in an international context is extremely complex and can often be fraught with issues. Advice should be taken at the earliest opportunity to avoid issues arising down the line.