At the moment a couple living and divorcing abroad but with a UK pension can share that pension. But not necessarily from 1 January 2021. This summary article acts as an important reminder to practitioners and individuals dealing with these issues to take urgent steps to obtain orders before the end of 2020.
In order to share a foreign pension in the context of a divorce financial settlement it is almost always necessary to obtain an order of the court where the pension is situated. So, if a couple divorcing abroad with a financial settlement abroad want to share their English pension, they need an English court order.
The English family court has the power to make financial orders (including pension sharing orders) after an overseas divorce pursuant to Part III of the Matrimonial and Family Proceedings Act 1984. This legislation can be used as a vehicle to obtain an English pension sharing order for those getting divorced abroad to share their English pensions.
But there is a big problem. There has to be a sufficient connection (known as jurisdiction) with England for the courts to be able to make an order. In broad terms what is required is habitual residence or domicile of one spouse. But this presents a real difficulty for international families who no longer have such an ongoing connection.
At the moment it is possible to use a residual power to make needs-based orders (which in most cases includes pension sharing orders) on an exceptional basis provided the courts of no other EU Member State have jurisdiction. Although the UK left the EU on 31 January 2020, this legislation remains in force in England until 31 December 2020 when the transition period ends. But from 1 January 2021 this basis of jurisdiction will no longer be available so couples with an English pension, living and domiciled abroad will no longer be able to obtain a pension sharing order.
For many years we have been calling for a simple change to be made to our domestic law to fill the gap. For example, when the Law Commission consulted in relation to the enforcement of financial orders in family cases, they extended the scope of the consultation at our request to include obtaining pension sharing orders after overseas divorces. Our firm responded with a recommendation that domestic law be introduced to provide limited jurisdiction where there is an English pension. This recommendation was endorsed by the Law Commission but regrettably has not been taken up by the government.
Our firm has also been actively involved in discussions with the Ministry of Justice throughout the Brexit process and this has continued during the transition period. Throughout those discussions we have consistently urged the Ministry of Justice to introduce domestic law to fill the gap at the end of the transitional period, but it is understood there is no likelihood.
We strongly encourage any couples (and their lawyers) presently working out divorce financial arrangements which may involve sharing a UK pension to urgently get in touch with us to make sure an order can be obtained before the end of December 2002. Otherwise they may be forced to revisit financial settlements which have been reached or were in the process of being negotiated to find alternative ways of seeking to achieve a fair distribution of assets without sharing pensions which are administered in England.