As with any asset a pension is generally shared when it comes to matrimonial asset splitting. In this article we explore splitting a UK pension transfer; divorce or separation can lead to the need to the split a UK pension, but unlike some other financial instruments they can be messy to unwind particularly because it is a pension and generally ring-fenced until retirement.
Many lawyers and advisers are not familiar with the process of a UK pension transfer and then for it to be split between the separating parties. So it’s important to have experienced people familiar with the processes involved. Timing is crucial and with the courts required to be part of the process from a compliance perspective timeframes can be long.
We have conducted numerous UK pension transfers for marital splits and our experience and advice saves time and money in legal fees and other costs such as tax (by ensuring that the process is not protracted).
There are several steps in the process so lets get started:
1. Getting the right advice
Understanding the steps required before you start the process. We will provide you and your legal advisers with checklist so you don’t miss any steps in the process, once you get started we provide authorised and regulated advice both at the UK and NZ ends of the transaction regarding the transfer of a UK pension for the purpose of a split.
2. Understanding the value of a UK pension
Understanding the true value of the pension transfer is not easy especially with a defined benefit pension. There may be benefits that exist in a UK pension that may not be fully understood without proper advice and there may or may not be tax to pay on the transfer so it’s crucial these factors are taken in to account before moving to the next step
3. Agreeing on the actual split percentage.
This may be a complicated process when taking into account all the factors regarding the value of the pension in concert with the other assets included in the split, at this stage if necessary your legal advisers will be most useful
4. Getting a court order
A court order is necessary to make the agreement binding. A court order is required in New Zealand before the scheme receiving the pension transfer can allocate funds received from the UK to someone other than the pension owner. A UK court order is not binding in New Zealand and the receiving scheme can’t act on it. The court order will reflect what has been agreed between the parties or where agreement cannot amicably be reached the courts may decide on the amount to be split after considering all the facts of the case.
5. Selecting the right scheme to transfer to
Like any investment it’s important to ensure you are going to the right scheme with the right funds that match your investment preference outcomes and risk profile. Charter Square works with authorised financial advisers with experience in QROPS and specifically advisers that have worked with pension splits. It may be when the funds arrive they don’t stay in the same scheme so ensuring the scheme you transfer to will allow an immediate transfer out to another scheme is critical.
6. Access to the funds
Unfortunately the non pension holder or beneficiary of the split is subject to the same rules as the pension holder and can only access the funds in the same circumstances. For simplicity sake no access until 55 years old. Currently that access is 30% of the pension pot soon to be reduced to 9% after 1 December 2016. If the pension holder is over 55 they have access to some of the pension so some cash may be available for distribution under the terms of the split.
What next? If you are caught up in a pension split or have friends or family that need help navigating the process contact us and ask for our specialist in pension sharing orders.