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Divorcing where there’s a UK-based pension? Act now!

Date:8 SEP 2020
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In recent years, there has been an increasing number of people moving abroad from the UK, with Australia and New Zealand being the most popular destinations. Whether these expats are motivated by family reasons, a sunnier climate, employment or retirement, there is no denying a growing trend in emigration from the UK. In fact, a BBC report suggests that an estimated 5.5m British people live permanently abroad – almost one in 10 of the UK population. In addition, many foreigners come to the UK and may live and work here for many years, building up an asset base, before returning to their country of origin.

From a legal perspective, difficulties can arise when parties divorce overseas, but still have assets based in the UK. Most commonly, parties have lived and worked in the UK for a number of years, whilst also contributing to English-based pensions. They then seek to rely upon a foreign divorce settlement to implement the pension sharing of an English-based pension (often by consent between the parties). However in reality, most English pension schemes will only give effect to a pension sharing order made by an English Court.

Under Part III of the Matrimonial and Family Proceedings Act 1984, the English Court has jurisdiction to hear cases where parties are seeking financial relief after an overseas divorce, if one party is domiciled or resident in England, or either party has a beneficial interest in a matrimonial home in England. However, it may come as a surprise to many, that if the parties have moved permanently abroad and have no intention to return to the UK, they are unlikely to still be considered as domiciled or resident here.

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Therefore, if none of the conditions regarding domicile, residence or ownership of property apply, the parties’ only option is to show that the court has jurisdiction to ultimately make a required pension sharing order under article 7 of the EU Maintenance Regulations, known as the ‘Forum of Necessity.’ This essentially means that where no other EU member state has jurisdiction, the court of any member state may, on an exceptional basis, hear the case so long as there are sufficient connections to that member state.

If the jurisdiction requirement is satisfied, an application can be made to the Court for an order by consent under Part III of the Matrimonial and Family Proceedings Act 1984 for financial provision following a foreign divorce. The order can specifically relate to a pension sharing order being made in relation to the party’s interest in an English pension scheme. The ‘exceptional’ requirement of the EU Maintenance Regulations is fulfilled on the basis that – otherwise -there would be no jurisdiction to make a pension sharing order and the connection with the UK is sufficient in that the asset to be dealt with is based in the UK. It is also worth noting that the application under the EU Maintenance Regulations must be on the basis of the parties’ needs , rather than sharing. This could be shown by (for example) evidencing that the party who is to benefit from the pension sharing order would otherwise have inadequate financial provision upon retirement.

However, there’s another catch. The UK formally left the European Union at the end of January and there are now less than six months left to negotiate and agree a trade deal with the European Union, with the current transition phase due to end on 31 December 2020. At the end of the transition phase (subject to any extensions), the EU Maintenance Regulations are unlikely to be applicable in the UK. Formal applications under the EU Maintenance Regulation are now time-dependent and should certainly be considered well in advance of 31 December 2020. As a divorcing couple, if you live abroad and still have pensions based in the UK, it is time to seek advice from a specialist family law solicitor in the UK; if proceedings aren’t brought swiftly, it may end up being impossible for certain former spouses to benefit from their ex’s UK pension, which would have otherwise been appropriate.