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”.
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.