Can a UK pension be shared by agreement following separation?

Since the introduction of KiwiSaver it is not uncommon for retirement savings, pensions, or superannuation to make up a substantial part of a couple’s relationship property pool. 

If one or both parties to a relationship have lived and worked in the UK they will also almost certainly have UK pension assets as well. 

It is only fair that all such assets, whether located in New Zealand or overseas, be the subject of division upon separation.

Under New Zealand law the position is not difficult.  If pension assets accumulated, in full or in part, during the relationship, then the proportion of the pension that accrued during the relationship is shared equally upon separation.

However, when UK pension assets are involved this is much easier said than done, even when everything occurs by agreement. 

There are complex laws in the UK around the governance of pension funds and their treatment upon divorce (or separation, as recognised under NZ law). 

Moreover, only a UK court can make orders formally dividing a UK pension.

A UK pension may be transferred to a qualifying recognised overseas pension scheme (QROPS) in New Zealand.  Placing all assets within one legal system might make the process easier, but it is never top of anyone’s list following separation, and there are significant tax implications in doing so, making this an unattractive option.

A traditional ‘workaround’ employed by lawyers in New Zealand who do not want to have to traverse UK law, is to value the UK pension asset(s), then calculate the entitlement of the party who does not own the pension, and give them a credit of this amount from the pension owner’s share of other capital.

But this solution is not for everyone, nor is it workable in every situation.  What if the UK pension is substantial, and/or greatly exceeds the value of the capital assets?  In such circumstances, the pension holder may be left cash-poor, or even in debt.

There is a solution for any party who can claim domicile in the UK.  Parties can apply to the UK court, by consent, under Part III of the UK’s Matrimonial and Family Proceedings Act 1984, to divide UK pension assets.  They can thereby formally transfer pension credits from the pension holder to the other party. 

This presents a real solution to the problem of dealing with substantial UK pensions without having to forgo capital. 

It is however advisable in such matters to instruct someone who is experienced in dealing with the UK courts, as court documentation and procedures in the UK are regularly changed and updated.

There are numerous pitfalls between the UK and New Zealand jurisdictions.  For further information, please see here

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