Navigating UK Pensions in Divorce: How UK Courts Can Help Non UK Residents After an Overseas Split

When a relationship breaks down, pensions may not be a top priority, but the jurisdiction where a divorce or dissolution occurs — and how a court handles pensions in the financial settlement — can be crucial, especially if pensions represent significant family assets. 

The Divorce Process 

If you and your ex-partner can agree on how to divide your finances, you can apply for a legally binding agreement. In England, Wales, and Northern Ireland, this is known as a ‘consent order,’ while in Scotland, it’s a ‘qualifying agreement.’ If an agreement cannot be reached, you can ask the court for a ‘financial order.’ 

The process generally involves: 

1. Engaging a solicitor and financial adviser.
2. Determining assets.
3. Obtaining valuations for all pensions, including the State Pension.
4. Evaluating pension options.
5. Going to court for a pension order.
6. Implementing the pension order. 

For non-UK residents divorcing abroad, it is essential to seek specilaist legal and financial advice to ensure the best outcome. 

An overseas court cannot issue an order over a UK pension, meaning if a divorce occurs outside the UK, one party could be left in a position where a UK pension remains with one party, even though it could, and perhaps should, be shared. 

In this article, we discuss how courts in England and Wales can sometimes intervene after an overseas divorce. In a separate piece, we explore how an English or Welsh court may handle overseas pensions during local divorce or dissolution proceedings. 

Part III of the Matrimonial and Family Proceedings Act 1984 

It may be possible to file an application in England and Wales under Part III of the Matrimonial and Family Proceedings Act 1984. This legislation provides a remedy for individuals who have divorced abroad but received no, or insufficient, financial provision from the foreign court, provided they have substantial ties to England and Wales. It is not intended to give a second chance at securing a more favourable settlement, but rather to address assets the foreign court couldn’t deal with, such as UK-based pensions. 

The process involves two stages: first, seeking permission to apply, and second, if granted, applying for the remedy. 

Eligibility For a Claim  

A claim can only be made if the marriage/divorce (or dissolution, legal separation, or annulment) is legally recognised in England and Wales. This may require confirmation from an expert family law solicitor. Unmarried separated couples cannot make a claim under Part III or any other legislation in England and Wales. The couple must also have been divorced in a foreign court. If the claimant has remarried, they are barred from making a claim.

Next, the application must meet one of the following conditions: 

• Domicile: Either party must be domiciled in England and Wales at the time of the application or at the time the foreign divorce took effect.
• Habitual residence: Either party must have been habitually resident in England and Wales for at least 12 months prior to the application or the foreign divorce.
• Matrimonial home: Either party must have a beneficial interest in a property in England or Wales that was used as the marital home. Note: if a claim is based on this criterion, the court can only deal with the property, not pensions. 

To address a UK pension, one of the parties must be domiciled or have been habitually resident in England and Wales for at least a year. Not all divorcing couples with UK pensions will meet these criteria, which may limit the court’s ability to assist. However, other practical options, such as transferring a UK pension to the jurisdiction of the divorce, may be available and should be explored with legal and financial advice. 

Your Options  

If you are divorcing or dissolving a civil partnership, the court will generally consider pension rights. 

In England, Wales, and Northern Ireland, this usually includes the total value of all pension rights, regardless of when they were accrued. In Scotland, only the pensions built up during the marriage or partnership are included, excluding pensions accumulated before the marriage or after the date of separation. 

There are three ways to handle personal or workplace pensions during divorce or dissolution: 

1. Pensions offsetting: The value of pensions is offset against other assets. For example, one party might receive a larger share of the family home in exchange for the other keeping their pension. This offers a clean break without affecting existing pensions.
2. Pensions sharing: All or part of one person’s pension is transferred to the other party. This share can be transferred into a new or existing pension in the other party’s name, allowing them full control over when and how to use it. This also provides a clean break, though it doesn’t include life cover or death benefits.
3. Pension attachment/earmarking orders: One party agrees to pay a portion of their pension income to the other when it becomes payable. In most of the UK, this is known as an ‘attachment order,’ while in Scotland, it’s called ‘pension earmarking.’ It does not offer a clean break, as the original pension holder still controls when and how the pension is accessed. 

Dealing with state pensions depends on the date you reach State Pension age and follows different rules. 

After the Pension Sharing Order  

The party receiving the pension sharing order may need to find a new pension provider, which can be complicated and may require expert advice. Transferring the pension directly to a foreign jurisdiction might not always be possible or advisable. Many UK schemes do not allow non-residents to open new plans, so you may need a UK pension plan that accommodates non-residents and to work with an adviser regulated to provide this advice in the jurisdictions concerned. 

At SJB, we have experience guiding both existing and new clients through these complex issues, helping them find tailored solutions and working alongside legal professionals for the best outcome. We offer a free introductory consultation to discuss your unique circumstances. Please follow the link below to arrange a call with an adviser. 

Sources:

• www.flip.co.uk
• www.weightmans.com.
• expatriatelaw.com
• www.moneyhelper.org.uk

Written by: Randal Stephens – Independent Financial Adviser