What Is A Pension Sharing Order?
A pension sharing order allows a pension fund to be divided. This means that some or sometimes all of the fund is transferred to the other party, allowing them to have a pension of their own. The order is always made as a percentage of the value of the pension rather than a fixed amount.
However, as pensions go up and down in value, by the time the pension sharing order is actually implemented and takes effect the amount can be very different to the original figures on which the settlement was agreed.
Can A Pension Sharing Order Be Varied?
It is an usual course of action but it is possible. Any application to vary has to be made before the pension sharing order takes effect and before the Decree Absolute has been pronounced in the divorce. It is because the Decree Absolute is often applied for quite shortly after making the order that such applications are rare.
So, What Do The Courts Think About Such Applications?
The recent case of T v T (Variation of a pension sharing order and underfunded schemes) is the first reported case of such an application so we don’t have much idea of what the Court think. In this case the pension sharing order was actually made in 2015 in favour of the wife for 40% of the husbands pension. The order is usually implemented within found months of it being made. However, in this case there were a lot of problems because the scheme was underfunded and there were misunderstandings about how the order could be implemented.
By the time the various issues had been resolved it was two years later and the husband’s pension had increased from just over £800,000 to almost £2.5million. Understandably, the husband wasn’t happy about his wife having 40% of the updated value so he made an application to vary the pension sharing order in November 2017. The wife applied for the Decree Absolute which was pronounced in December 2017.
That situation in itself could have caused even more problems for the wife. The husband’s application to vary the pension sharing order meant that the order couldn’t be implemented. If the husband had died before the matter was resolved, because the Decree Absolute had been pronounced there would be no widow’s benefits under the pension. The wife would then have been left with nothing from the pension even though she originally had an order.”
The Issue Of Variation
Turning back to the issue of variation, the application was turned down by the Judge. This was because if we use the original figures, even if some amount is added to the cash sum that would have been transferred to the wife to take into account inflation, due to the changes in the market conditions the income benefits that the wife would have would be a lot lower than had the pension credit been transferred when the order was originally made.
There was no reason why the wife should lose out financially because the order wasn’t implemented straight away, and it wasn’t for want of trying by the wife. The husband was also getting a big increase on the original amount with his remaining 60% share of the £2.5million pension.
Was The Decision Wrong?
Whilst it feels wrong on one hand that the wife benefitted from such an increase in the pension that hadn’t been anticipated, I think that the decision was right. The Court at least needed to ensure that she was put in the same position she would have been if the order had been implemented straight away.
It is clearly important to deal with implementing any pension sharing order as quickly as possible to avoid such problems arising.
If you need advice on separation and pensions, please do not hesitate to contact us on 0800 011 6666. Alternatively visit the Family Law section of our website here.
