In my experience, pensions can be very valuable assets which are often overlooked or disregarded by couples who have separated and are heading for divorce. This is often the case when one or both spouses choose not to take legal advice. For those who are separating in Scotland with UK pensions, it is recommended that they obtain valuations of those pensions and discuss with a family law solicitor the options available to them. What should happen, however, where there are also pensions held overseas? In short, they are no different and should be properly considered as their value can be significant.
Working abroad and accruing international private pensions
In and around Aberdeen and the North-East of Scotland in particular, there are many international workers who have accrued international private pension benefits. Some of those hail from overseas while others are UK nationals who have worked abroad. How should these international pensions be valued and how should they be dealt with on separation and divorce?
The answers will vary from one country to the next and it is not possible to give an exhaustive account here. It is likely that advice will be needed from a family law solicitor in the other country and expert input regarding valuations may be required in Scotland and from abroad.
The starting point: What are the pension rules in each country?
The starting point should be to check whether there are any particular rules in the country from which the pension benefits originate regarding division. For instance, in the Netherlands, Dutch law provides that Dutch private pensions should be subject to a "standard division" between spouses on divorce unless the spouses have agreed otherwise. In these circumstances, the holder of the pension may have a good understanding of what will happen on divorce if there is a standard division but it is unlikely that his or her spouse will be suitably informed. They may not know when the pension income will become payable and may assume that they would have entitlement to take a tax-free lump sum from the pension at retirement age (which is not permitted under Dutch law).
Does the country allow for pension sharing on divorce?
If there are not standard rules about division of international private pensions, then it is important to ascertain whether they can be shared at all. In France, for example, French law does not allow for pension sharing on divorce.
If pensions cannot be shared between the separated spouses on divorce, then it does not follow that they should be ignored. Valuations should be obtained. In Scotland, where the law provides for the possibility of splitting a pension fund on divorce, the law provides for the type of valuation that is required. What is intended is that a capital value is placed on the pension benefits at the date of separation. It is important to establish how much it would cost to replace the benefits which have accrued. In other jurisdictions, where pension sharing is not possible and where pension benefits are not ordinarily taken into account on separation and divorce, it can be more difficult to establish the value.
How to value an overseas pension for divorce
It may be possible to get a simple valuation of pension benefits for an overseas pension but this should be scrutinised. Different methods of valuation may not fit with the approach to pensions here. Actuarial input may be required to confirm that a valuation is reliable. In other cases actuaries here may be required to place a valuation on an international pension fund.
If the value of the foreign pension can be agreed then it can be taken into account in overall settlement. If pension sharing is not possible then the value of the pension may be offset against other assets when dividing the matrimonial property.
What happens if both parties can't agree?
Where high values are placed on international pension funds and such values are not accepted by the other spouse, however, there is the potential for litigation. In contested cases expert evidence is likely to be required to allow the sheriff or judge to determine the matter. Obtaining the right advice and expert input about international pensions could be key to avoiding unnecessary litigation in the first place.
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