Pensions Outside of the Jurisdiction

Many divorces in England and Wales involve disputes regarding assets that are held outside of the jurisdiction. Dr Alex Khan examines the issues that may arise.

Dr Alex Khan

Pensions are, after property, most likely to be the largest of such assets. Hence, when considering issuing a financial application and subsequently considering settlement or judicial determination, the common question that arises is whether the court has the power to consider pension sharing in relation to the overseas fund of either or both party.

The most recent and seminal assessment of this issue was made by Mostyn J in Goyal v Goyal [2016] EWHC 2758 [Fam]. This was a rehearing ordered by the Court of Appeal ([2016] EWCA Civ 792]) following the permission judgment of Kitchen LJ ([2016] EWCA Civ 792]), both decisions being available on Bailii should more detail be required.

Time restrictions meant that Mostyn J considered only two questions at the rehearing.

First, whether a pension sharing order can be made under 24B Matrimonial Causes Act 1973 with respect to a pension held out of the jurisdiction.

Second, whether the party asserting a pension sharing order with regards to their spouse’s pension can adduce evidence to suggest that such an order would be enforced in the jurisdiction in which it is held.

In the Goyal decision, it was determined that a pension sharing order pursuant to section 24B cannot be made.

Furthermore, the Respondent wife was unable to adduce evidence that such an order could be enforced in the originating jurisdiction and which was India.

In generally, this does not prevent the court considering the relevant pension fund, usually calculated in the form of the Cash Equivalent Transfer Value (CETV) as part of the overall marital pot of finances. Indeed, Mostyn J gave an example of one of his previous decisions which related to a pension based in the USA where an order by consent was fortified by an undertaking to the court. This method requires endorsement by the parties that the foreign pension provider will give effect to the deal to share. Such an arrangement is generally possible in common law jurisdictions such as Australia and New Zealand, where the courts are more likely to enforce the order of the court in England and Wales.

RCJ pension appeal divorce

However, as Mostyn J clarified, “this is a far cry from the court positively exercising dispositive powers over a foreign pension scheme”. Furthermore, the latter method is not appropriate for a Qualifying Recognised Overseas Pension Scheme (QROPS) where a domestic pension scheme has been transferred out of the jurisdiction unless an identifiable mechanism is expressed in relation to that pension fund within that foreign jurisdiction.

For the avoidance of doubt, in the absence of expert evidence of a pension sharing order being reciprocally enforced in the foreign jurisdiction, it is simply not possible for the domestic court to make an order that Mostyn J described as ‘extra-territoriality’, the leading case being Hamlin v Hamlin [1986] 1 FLR 61.

Two further considerations arise

First, the rationale as to the pension sharing can often relate to not only the assumption of the equality of division (for a reasonably long marriage) but also to the needs of the party and other factors, as prescribed by section 25 of the MCA 1973. These factors will be determinative of the proportions and/or sums involved in any order made by the domestic court. Hence, expert evidence of the value of nature of the pensions under consideration should be considered in anything other than the most simplistic of pension funds. This will assist both the court and the parties as the nature of foreign funds will be unfamiliar whereas, for example, the standard NHS or Civil Service individual funds are generally well-known to the courts.

Second, a distinction needs to made with an property adjustment order covering foreign property and which can generally be as it is an in personam order whereas an order relating to a foreign pension fund involves a third party, i.e., the pension fund, and so would be an order in rem. These matters will be explored further in other articles.

Alex has practised as Chancery and Family Counsel for over 15 years. Before that, he spent 5 years in corporate management and marketing.

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