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Australian Family Law and UK Pensions

Not infrequently, you may have a client with the need to include a UK pension in the matrimonial property pool. It is best that this is done in an offset manner as in England and Wales sharing can only take place via a UK Court Order. In Scotland, the rules are slightly different and splitting can also be activated by a negotiated “qualifying agreement”.

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Australia has an unusual superannuation tax structure compared to most of the rest of the world. Contributions and earnings built up are concessionally taxed and benefits after age 60 are largely tax exempt. Consequently, for funded entitlements no adjustments are needed to the matrimonial asset value as preservation rules ensure monies are kept until tax free. UK tax on entitlements is the opposite, with benefits being taxed. A significant part of any valuation report is to calculate adjustments for this factor. One needs details of Australian tax residency for the parties and information of any contributions/accrual of entitlement since that date.

There are many different types of UK pension schemes. One group consists of the basic state pension; additional state pension; and the new state pension. These are similar to the Australian Old Age Pension and tend to be a financial resource and not an asset, however it is possible that there is a “protected payment” component that may be able to be shared between the parties.

There are personal pension schemes and stakeholder pensions (similar to industry funds in Australia) that are straight forward. What exists in massively greater numbers than in Australia are occupational defined benefit funds. The starting point with these schemes is to request a cash equivalent transfer value (CETV) at a current date. The schemes are required under UK pension rules to provide free of charge at least one calculation per year. Getting this information can be thought of as the equivalent of obtaining Form 6 Family Law Superannuation Information in Australia.

The above is a very simple summary. It does not (for example) look at the difference between growth phase and payment phase - however the CETV is a good starting point.

More information is available by emailing Brian@NetActuary.com.au. We look forward to assisting with any such matters. The cost is the same as normal Australian superannuation valuations i.e. $385 inclusive of GST irrespective of the number of schemes held by either party.

NetActuary P/L ABN 94108585164
3/19a Hunter St, Hobart, Tas, 7000
PO Box 750, Sandy Bay, Tas, 7006
Email: Brian@NetActuary.com.au
Direct Telephone: (03) 9028 5002