English pensions and Australian superannuation on divorce: what you need to know

If you have lived and worked in both England and Australia, your English pension and your Australian superannuation may be among your most valuable assets. A court in one country generally cannot divide a pension held in the other.

I often advise couples whose retirement savings sit across two or more countries. In my experience, people assume the court dealing with their divorce can deal with everything. For superannuation and pensions, that is usually not so, and an order made in one country can close the door to a claim in the other.

This article focuses on England and Wales. Scotland and Northern Ireland have their own courts.

Why advice in both countries matters early

A UK pension is shared only by an order of a UK court. Australian superannuation is split only by an Australian court order or a valid Australian superannuation agreement. Neither country's pension providers will generally act on an order made in the other. That is why advice in both countries should be taken early, and before any final financial order is made.

The right court may not be available in both countries, and the tests are different. The order made in the first country should anticipate the second, setting out how each pension is to be divided, who will apply in the other country, by when, and who pays. A final order that does not do this can rule out a later claim.

The wording must work where it will be implemented. In England a pension share is expressed as a percentage. In Australia a split can usually be a dollar amount or a percentage.

Which part of this applies to you?

Start with the section that matches what you hold:

• I have a UK pension
• I have Australian superannuation
• I have both
• I am referring a client

If you have a UK pension

This section is for you if your divorce took place, or is taking place, outside England, for example in Australia, and you or your former partner built up a UK pension.

Can the English court deal with my pension if we divorced overseas?

Where the divorce took place outside England, the English court can deal with a UK pension only if certain tests are met. Having a UK pension is not enough on its own.

Remarrying can end your right to apply for an order in England after an overseas divorce, so take advice before you remarry.

The divorce must also be recognised in England, and at least one of you must:

• be domiciled in England and Wales (a legal concept, broadly the country you treat as your permanent home) when the application is made, or have been domiciled in England and Wales when the overseas divorce took effect;
• have been habitually resident in England and Wales (broadly, have made your home there) throughout the year before the application, or the year before the overseas divorce took effect; or
• own an interest in a home in England or Wales that was at some point your family home. This route does not allow a pension to be shared, and it limits what else the court can do.

What if I cannot show a connection to England?

This can be hard for those who spent a short but pension-rich period in England before moving on. If the English court cannot share the pension, it may need to be taken into account in the property settlement by offsetting it against other assets. Offsetting is complicated, because a pound in a pension is not worth the same as a pound in cash, and published guidance on valuing pensions on divorce is the benchmark. Actuarial advice is usually needed.

Another possibility is moving the UK pension to an overseas scheme that can then be divided locally. This only works if the pension holder agrees and a receiving scheme will accept the transfer. There can be significant tax consequences in both countries, so specialist tax advice should come first.

What happens if I can apply?

There are two stages. The first is permission to apply, which is given only where there is a substantial ground for the application. A contested permission application can take considerable time and cost.

The second is the court deciding whether an English order is appropriate. It looks at your connections with England and elsewhere, any relief already obtained abroad, how much time has passed since the overseas divorce, and how far an English order is likely to be enforceable.

Where the overseas order anticipates the English application and the parties agree, both stages can be dealt with together, with a draft consent order setting out how the pension is to be shared. If the application is contested, permission is dealt with first.

If you have Australian superannuation

This section is for you whether your divorce is in Australia, England or elsewhere.

Why is an English order not enough?

An Australian superannuation trustee (the company that runs the fund) is bound to split a member's interest only by an Australian family law order, or by a valid superannuation agreement. An English order, however clearly drafted, has no direct effect on an Australian fund.

What if we are divorcing in England?

In the reverse situation, an English divorce with a pension abroad, the English court generally cannot order an overseas pension scheme to share the pension. The overseas pension still counts in the overall division, but local advice is needed on how to divide it. Australian superannuation is a good example, which is why Australian advice should be taken before any English order is made.

Can the Australian court act if we live in England?

The Australian court can generally deal with property if either of you is an Australian citizen, is ordinarily resident in Australia, or is present in Australia on the day the application is filed. For many expats this is straightforward, because one of them holds Australian citizenship even while living in England.

Is there a time limit?

For married couples, a common worry is that Australia's 12-month time limit for property claims starts when an overseas divorce is granted. It does not. The limit applies only where the divorce is granted in Australia.

Delay is still a risk. The other party may argue that Australia is the wrong place to bring the claim, that running cases in both countries is unfair, or that England has already decided the matter. I recommend acting promptly.

How is superannuation split?

Where the parties agree, the usual route is consent orders. Each fund is first asked for valuation information, and each fund trustee is given the chance to comment on the proposed orders, so the wording must be something the fund can implement.

The court must be satisfied the orders are just and equitable. English proceedings and assets should be disclosed openly. A one-way superannuation split makes sense once the court can see, for example, that the other party is receiving the England home. Orders made without full disclosure can later be set aside if this led to a miscarriage of justice.

Alternatively, a superannuation agreement, made as part of a binding financial agreement, can be given to the fund to trigger the split without a court application. Each party must receive independent legal advice before signing, and the signed statements from each adviser must be exchanged. Whether an agreement is suitable where one of you lives overseas is something to take advice on.

Whichever route you take, if the funds could be moved in the meantime, steps can be taken in Australia to freeze payments from the fund until the split is resolved.

Will an English order be recognised in Australia?

An order made overseas will not usually change who owns property in Australia, and it cannot direct an Australian superannuation fund. Orders requiring one person to pay money to the other can sometimes be enforced in Australia, but this needs checking case by case.

An overseas divorce on its own does not stop an Australian claim. But if an overseas court has already finally decided the property claims, the Australian court may treat the matter as already decided, or decline to hear it.

If you have both: making the two systems work together

Where an English order is agreed or decided and there is Australian superannuation, how the order is worded often decides whether the superannuation can be split at all. In practice:

• Take advice in both countries early, so the English order is settled with Australian input before the final hearing.
• Say expressly in the English order that the superannuation is to be divided by orders made in Australia. A full and final English order that dismisses all claims, without preserving the Australian superannuation, invites the argument that the Australian claim has already been decided.
• Personal promises (undertakings) from the person holding the superannuation can help: to sign the Australian orders in an agreed form, to allow fund enquiries and not to move the superannuation. But they are only as good as they are enforceable. Where possible, agree the Australian steps in detail, or take them, before or alongside the English order.
• The Australian court makes its own assessment, and the fund trustee must be given a chance to comment, so the outcome cannot be guaranteed in advance. A fallback payment if the Australian split is not achieved within a set time, ideally secured, protects against that.
• Do not delay. Have the Australian application ready to file soon after the English order, as delay can strengthen arguments about where the claim should be heard and whether it has already been decided.

What I see people get wrong

The most common problem I see is a final order in one country that rules out a claim in the other. People assume one country's order will deal with both pensions, agree a final order without input from the other country, remarry before checking what they can still claim, or wait because they think there is plenty of time.

Other points to raise early

• If you have not yet divorced. Where you start proceedings is important, because more than one country may be able to deal with the divorce and the finances, and each applies a different approach. Early advice on where to start is critical.
• Unmarried couples. Different rules and time limits apply, and in England unmarried partners cannot apply to share the other’s pension, although reform is under consideration.
• State pensions. These are treated differently from private and workplace pensions, so ask about them separately.

If you are referring a client

To make a first conversation useful, please ask your client to bring:

• the names of each UK pension scheme and recent statements, and the Australian superannuation fund statements;
• the dates they lived in each country, and their citizenship;
• any divorce papers or court orders, in either country; and
• details of any plan to remarry, or to finalise a divorce or financial order.

Please contact me before your client signs or agrees to a final order in either country or remarries.

Questions to ask yourself

• Do you have a pension in England and superannuation in Australia, or an interest in either?
• Have you divorced, or are you about to agree to a final order, in one country only?
• Have you or your former partner remarried, or do you plan to?
• Have you taken advice in both countries, or just assumed one set of advice covers both?
• Do you know whether the order being proposed says how the other country's pension will be dealt with?

Dealing with this before a final order is made is easier than trying to fix it afterwards. If you have a pension or superannuation interest in England or Australia and are separating, or you are advising someone who is, I would be glad to talk it through with you.

Author: Charlotte Symes, Partner, Family & Relationship Law