Relationships are risky and many hit the rocks and end in acrimonious disputes over who keeps the pets – and any cash in savings.
The statistics on just how many relationships end vary – but the trend is for around one in four to end with one half walking out.
If the couple have been together for a while, the two biggest assets are probably the family home and any pension.
The rules over splitting pensions are different for couples living in the UK and expats.
Cases repeatedly come before the courts in Britain calling for a judge to give a share of a pension generally to a former wife as part of a financial settlement.
UK courts powerless overseas
In the UK, the judge can set off the pension fund value against other assets, but the courts tend to follow the ‘earmarking’ rules that demand a pension fund pays a share of the pot to the other party when the pension saver retires.
To stop people from abusing the order, the court can order the fund to pay a lump sum.
Pension splitting is another option for the court. The judge can order the pension fund to transfer some or all the cash savings to another scheme.
But that’s in the UK.
For expats, the picture is not quite so clear.
British courts do not have jurisdiction overseas, so if one of the divorcing couple has switched their pension fund to an offshore Qualifying Recognised Overseas Pension Scheme (QROPS), the money is beyond the reach of the courts for good.
Breach of trust
The judge can still make an order against any assets, including property, in the UK, but that’s the limit of the law for expats.
Earmarking and pension splitting are not options and the court cannot order a retirement saver to transfer money back from offshore to a UK scheme.
Most offshore pension administrators would view following a UK court order as a breach of trust between them and their client.
Although protection from the British courts on divorce is an unforeseen consequence of pension rules, transferring money offshore to avoid paying a spouse some of the fund is not a good financial reason for the move.
Cross-border tax rules are complicated and become even more so when divorce is involved, so always take professional legal and financial advice before moving money overseas.
QROPS Information and Guidance
For more information about QROPS and the benefits it provides, download the iExpats QROPS Guide or complete the Get Advice form.
