The ruling by Mr Justice Mostyn supported the husband’s argument that divorcing partners are obliged to share only their UK-based pensions with former spouses. In contrast, said the judge, UK law could not extend to including QROPS pensions in divorce financial settlements.
The case sought to address whether the Family Court had the power to order the transfer, sharing or assignment of a pension in jurisdictions outside of the UK; in the end it decided that QROPS pensions fell outside the strictures provided by the Matrimonial Causes Act 1973.
The judge said that even if the overseas jurisdiction could enforce an order of the UK courts, the court actually had no real power to make such an order and to do so would conflict with the “presumption against extra-territoriality”. However, he further commented that if the money in the pension comes back into the UK, the wife would be able to make a claim on it; as such he decided not to dismiss Ms Goyal’s claim on her husband’s fund.
The ruling serves to affirm the existing law as it extends to QROPS pensions in relation to financial remedy orders in divorce cases.
However, it is important to remember that in some jurisdictions spouses may be able to make sharing applications in order to try and gain access to funds.
More information about QROPS pensions with Blacktower can be found here .
Juicy lottery-sized sums are being offered to savers to tempt them out of gold-plated workplace pension schemes and into personal plans. We’ve explored whether you should consider taking a final salary pension, as well as the benefits and drawbacks of withdrawing.
What is a final salary pension?
A final salary pension, sometimes referred to as a gold-plated pension, is a special style of retirement fund that is based on your final or average salary.
The main difference between this and a defined contribution pension is that a final salary scheme gives you a guaranteed sum annually for the rest of your life when you retire.
To work out the value of your final salary scheme, consider a few factors:
Your final or average salary at your place of employment (confirm this with your employer)
Your length of service
The final salary scheme’s accrual rate (this is often 1/80th)
Your final salary pension will take each factor into account, and the resulting figure will be the guaranteed annual sum you are entitled to.
For instance, if you worked somewhere for ten years, and leave on a salary of £100,000, with an accrual rate of 1/80th, you will have a guaranteed retired annual income of £12,500.
It is possible to undertake a final salary pension transfer. Depending upon how long you expect to enjoy retirement, this could be a favourable choice. However, it’s important to consult a financial advisor to make your final salary pension transfer values work harder.
What are the benefits of transferring a final salary pension?
Assessing your final salary pension transfer value, you might consider it worthwhile to withdraw. We’ve outlined the main benefits of taking your final salary pension:
Receive the cash value of your final salary pension
Withdrawing from a final salary scheme allows you to receive a cash lump sum in return for forfeiting your guaranteed income in retirement. This final salary pension transfer value is the main reason to withdraw from a scheme, as it offers you financial freedom.
Remove ties with your employer
This is an especially important point if you’re concerned that your employer may not exist throughout your full retirement. For most, the pension protection fund (PPF) will cover your pension, but, for especially high earners, there is a PPF ceiling of £41,461 (as of April 2020).
Enjoy a flexible income in your retirement
A final salary scheme entitles you to a guaranteed annual income when you retire, but if you go down the route of transferring your final salary pension you will be able to enjoy a little more flexibility in how you receive your income. Usefully, by withdrawing from your final salary scheme, you can choose to take more out in your younger years.
Choose how you want to invest your pension
A final salary scheme is controlled tightly to accommodate all employees and their interests. When withdrawing from the scheme, however, you can take complete control over how your pension fund is invested.
The considerations you should make before transferring your final salary pension
While there are certainly benefits of going down the route of transferring final salary pension funds into various other pots, it’s important to consider what you’ll be giving up:
Entitlement to a fixed annual income for the rest of your life
A safe income that doesn’t fluctuate with volatile markets and share prices
Spousal and family benefits that come with a final salary scheme
Example: Should I cash in my final salary pension?
An example is Mrs Dee (not her real name), 4 years ago she asked for her final salary transfer values, which came in at £250,000 – a nice sum, you may think. After reviewing all the facts and figures available, however, I advised Mrs Dee to leave her final salary pension where it was, which she duly did.
Towards the end of last year, because of favourable market conditions, I applied again to see the value of transferring her final salary . This one came in at just under £600,000.
Over the past year, I have come across many an expat, not just UK expats, but Dutch, Belgium and German who have said to me, ‘I am not doing the Modelo 720 as the EU has ruled it is illegal, and also the Spanish authorities will never find out if I don’t declare.’