As part of a financial settlement upon divorce, it is common for a pension sharing order to be made. What this means is that some of one person’s pension pot will be transferred into the pension of the other person. It is then part of their pension pot and treated as their own investment.
The process itself, however can be longer than some of the other orders that the Court makes. The order will not come into effect until the later of 28 days after the date of the Court order granting the pension share, and the final divorce order (previously known as Decree Absolute).
After that however, the person who will be carrying out the transfer has four months from receipt of all necessary information to be able to implement the order. This means they need to receive not just the financial order and final order in the divorce (or Decree Absolute), but also details of where the pension credit should be transferred to, and sometimes identification documents depending on the scheme. If there is a fee to be paid on the transfer, this also needs to be dealt with.
This means that it is not an instant process. This can lead to a scenario where the person who is due to receive the pension credit sadly passes away before the order is implemented. An issue can arise if the final order has been made in the divorce and the 28 days have passed, but the recipient of the pension sharing order sadly passes away after this.
Often, pension sharing orders are needs based awards and they are made in order to ensure a party has their pension needs met in retirement, to the extent that they can. If they pass away, then this means they will not need to use the pension.
However, as the pension credit is something they were ordered to receive, the pension would become an asset that they would leave to their beneficiaries upon death.
This means that even though the person who died will not be benefiting from this, there are other interested parties who could receive the pension.
Often, as part of the process of agreeing the final order, wording is put into the pension sharing order confirming that in the event that the recipient of the order dies before implementation, the personal representatives will not object to an application to appeal this section of the order. This does not mean they would agree to set aside of the order, but that they would allow an application to be made.
This arose in a recent case of Goodyear v the executors of the estate of Goodyear, where that clause was not included in the consent order. However, in that case the judge decided that while it is helpful for it to be included, the absence of this did not prevent an application being made or show that the matter had been considered. This case confirmed that the right application to make was to set aside, rather than to appeal.
So if this happens, what can you do?
The person who was giving the pension share is able to apply to Court to vary the order. The recent case has confirmed that this should be an application to set aside that part of the order rather than an appeal. If the personal representatives consent to this then this makes the process simpler.
It is possible however that the personal representatives will not consent. Either way, you would need to show the Court the following:
- New events have occurred since the order which invalidate the basis or fundamental assumption on which it was made, so that if leave to appeal would be granted, the appeal would be certain, or very likely, to succeed.
- The new events occurred within a relatively short time of the order being made.
- The appeal is made reasonably promptly in the circumstances of the case.
- The appeal would not prejudice third parties who have acquired, in good faith and for valuable consideration, interests in property which itself is the subject matter of the relevant order
These are the tests for whether something is a Barder event, i.e. an event which constitutes a material change which invalidates the basis of the order, meaning there is good reason to set it aside. It has been confirmed that the correct procedural route is an application to set aside rather than an appeal, but the test remains the same.
For the fourth criteria particular consideration needs to be given to the pension scheme, to confirm if they have taken any steps or would be prejudiced by the order being set aside. You should also consider the rules of the scheme to see what the position would be without the order being set aside, and what would happen to the pension credit in each case.
A death may not automatically be a Barder event as it depends on the reasons the order was made. If as above, it is to meet pension needs in retirement, it is more likely to be assumed that the basis for this was to give an income and so if the party has died, this assumption no longer applies.
However, a pension sharing order may instead be made to give an equal share of capital built up in the marriage for example, rather than it being needed. In that case, it could be considered to be more like a bank account or other asset the recipient may choose to leave in their estate, and so a death does not automatically change that.
If the application is contested, the Court will also have to consider the interests of the beneficiaries of the estate of the deceased. In some cases, the personal representatives will agree that the pension sharing order should be set aside.
If that is the case, as long as the test above is met, the Court would be able to set aside the pension sharing order, returning it to the person who remains alive. The Court would need to be satisfied the executors understand what they are giving up in agreeing this, given it goes against the interests of the beneficiaries.
In the case of Goodyear, the executors did not agree so the Court had to balance their interests with the merits of the application. These cases are always fact specific, but in that case the Court considered that while the pension sharing order was made to meet the needs of the wife who had now passed away, she had also made a full contribution to a long marriage and so if they had known that she would die shortly after the hearing, an order might have been made granting her a share of the pension capital in any event.
Her estate was therefore granted a reduced share of the husband’s pension credit, reflecting that she had died but giving some of this to her beneficiaries.
It is a complex area but if you think this may apply to you, the key is to ensure there is no undue delay and take advice promptly to consider your options.
For further advice and information on financial rights after divorce, contact one of our specialist family lawyers.