Pensions and insurance — overviewGeneral principles

Orders in respect of the parties’ pensions enable the court to share the benefits under a pension arrangement between them. The court is guided by the Matrimonial Causes Act 1973 (MCA 1973), s 25(2) factors and the corresponding provisions in the Civil Partnership Act 2004 (CPA 2004) in considering whether to exercise its discretion, in particular to have regard to any benefits that a spouse or civil partner has or is likely to have at any time and any such benefits that they will lose the chance of acquiring by virtue of the divorce, dissolution or annulment. The court should adopt the same approach as it does when considering whether to make any other order for financial provision or property adjustment.

Preparation of application

An application for pension sharing should be pleaded in the first instance in either the petition or answer (for proceedings issued prior to 6 April 2011) or the petition or respondent’s petition (for proceedings issued on or after 6 April 2011), if applicable, and subsequently by notice in Form A.

Practice and procedure

By virtue of the Family Proceedings Rules 1991, r 2.70 (for applications issued prior to 6 April 2011) or the Family Procedure Rules 2010, 9.29-9.36 (for applications issued on or after 6 April 2011), the applicant must serve the person responsible for managing the pension arrangement in respect of which the applicant seeks either a pension sharing or a pension attachment order. That person has 21 days to object to an order for pension attachment. Anyone with benefits under a pension arrangement must, within seven days of receiving notification of the first appointment, apply for a cash equivalent transfer value (CETV) or cash equivalent of benefits (CEB) and provide the other party with a copy, irrespective of whether an order is being sought or not. Where further information is required because a pension sharing or pension attachment order is sought, that information will be obtained in response to Form P directed at the first appointment.

Occasionally, it will be appropriate to jointly instruct a pensions expert to advise on the proper percentage split to produce the desired result. This should be directed at the first appointment.

Valuation of pension rights

The valuation of benefits is termed the CETV of the benefits acquired to date on the assumption that the member ceased employment on the date of the valuation. Where the pension is in payment, the prescribed valuation methodology is the cash equivalent of benefits (CEB).

Internal and external transfers

An internal transfer provides that the applicant becomes a member of the respondent’s pension scheme in their own right, by provision of what has been termed shadow membership.

Alternatively, the applicant may take a transfer of a designated amount into their own pension by way of external transfer.

Either way, the transferee acquires a pension fund in their own right.

Pension sharing

Upon the grant of a decree/order of divorce, nullity or dissolution, under MCA 1973, s 24B (or the CPA 2004 equivalent) the court may make one or more pension sharing orders in relation to the marriage or civil partnership. Such an order may not be made in relation to a pension arrangement that is already subject of a pension sharing order in relation to the marriage or civil partnership. An attachment order that is in force for this or any previous marriage or civil partnership also prevents a pension sharing order in respect of that arrangement. Pension sharing is only available if the petition was filed on or after 1 December 2000.

Pension attachment

This applies to post-1 July 1996 petitions and applies to all forms of relief including judicial separation. An order can direct that a percentage of the respondent’s pension payments, including lump sums payable, be paid directly to the applicant. The order can attach a percentage of either: the member’s pension in retirement; lump sum payable on retirement and on death after retirement; or lump sum payable on death in service after leaving service but before retirement. The person responsible for the pension arrangement may then be required to make a payment for the benefit of the applicant.

This is not available if the pension arrangement is or has been subject to pension sharing between the parties to this marriage or civil partnership.

Terms of order

The form of the order must: be expressed as a percentage of the CETV/CEB; be in the form of an annex, Form P1/2; for each pension arrangement, specify who is paying the charges. The order must not take effect until seven days after the time has expired for appealing or the date of decree absolute /final order, whichever is later. The order must direct whether the court or one of the parties is to send the pension sharing order to the pension arrangement.

Post-order steps

Within one week of the order or decree absolute/final order, whichever is the later, the court or one of the parties should send to the pension provider the order, including the annex, and a copy of the decree/final order. Both parties must provide the pension arrangement with the formal information set out in Pensions on Divorce (Provision of Information) Regulations 2000, reg 5. Service of the order and provision by the parties of the information triggers the start of the four-month period; the pension arrangement has to implement the pension sharing order.

Variation

The court’s powers to vary or discharge an order apply to pension sharing orders in limited circumstances: where a pension sharing order has been made but the application to vary is made before the order has taken effect, and before the decree/order has been made absolute/final. The court retains the power to vary pension attachment orders.

Effect of remarriage, civil partnership or death

As pension attachment orders are, in effect, periodical payments or lump sum orders, they are classed as financial provision orders. Therefore, under MCA 1973, s 28(3) remarriage or entering into a subsequent civil partnership bars an application unless the application was made before the remarriage or subsequent civil partnership. However, a pension sharing order is an order in its own right and is not included within s 28(3). Therefore, an application for pension sharing can be made following remarriage or subsequent civil partnership.

Where the applicant remarries or enters into a subsequent civil partnership after a pension attachment order has been made, the deferred lump sum order does not cease to have effect but the order for periodical payments will cease. Remarriage or entering into a new civil partnership has no effect on a pension sharing order that has been made.

Death has no effect on an implemented pension sharing order. In respect of a pension attachment order in the form of periodical payments, this will cease if the paying spouse or civil partner dies in retirement or the receiving spouse or civil partner dies.

The court has no jurisdiction to entertain an application for ancillary relief (a financial order) where either party has died since the suit abated.

Insurance and endowment policies

The payment of premiums on such policies can often be part of a settlement on divorce or dissolution: the paying spouse or civil partner often continues to maintain such policies to provide security in the event that they die during the lifetime of a periodical payments order.