Tick the box at your peril: a warning for lawyers completing the Pension Sharing Annex form P1

Financial remedy lawyers are familiar with the Form P1 Pension Sharing Annex under section 24B of the Matrimonial Causes Act 1973. It records the instructions for how to share a party’s pension and who is to bear the cost, and also contains the parties’ details. It is approved by the court and sent to pension administrators to start the process of implementation of a pension sharing order.

Crucially, it also contains a binary choice for the party receiving the pension share: whether to opt for an internal or an external transfer of pension funds. It is this section – the discretionary section F – which requires extreme caution, says the report of the Pensions Advisory Group, ‘A Guide to the Treatment of Pensions on Divorce[1]’.

The report, published in July 2019, is a wide-ranging and much welcome summary of recommendations and guidance in what is a much-used but sometimes little-understood area of financial remedies. It has been praised by the President of the Family Division, Sir Andrew McFarlane, who says in the Foreword: “I endorse this report and, in doing so, commend it to all judges and practitioners as formal guidance to be applied when any issue regarding a pension falls to be determined in Financial Remedy proceedings”.

It is a recommendation of the report that section F of Form P1 be removed. The concern of the authors of the report is that completing that section – i.e. by asking your client to decide on an internal or external transfer (where either is an option) and ticking one box or the other – amounts to regulated financial advice which lawyers are not “regulated, qualified or insured to give”.

The report goes further and says that, where both an internal and external transfer is available, the complexity of the issue and the factors to consider prior to the court approving the order mean that “the non-member spouse couldn’t possibly be in an informed position to make this decision, nor could their lawyers without breaking the law[2]”. A very stark warning indeed, particularly when such forms are completed at the door of court, or considered an administrative after-thought.

The warning applies only where both transfer options are available. When only an external transfer is possible, the transfer by way of Pension Sharing Order is not deemed to be a regulated transfer (under a dispensation from the Financial Conduct Authority). It is the availability of an internal transfer which triggers the regulated transfer advice rules, and that means the client obtaining independent regulated financial advice.

In summary, the reports warns: “If a family lawyer ticks the external or internal transfer box on behalf of their client then they may inadvertently give regulated transfer advice, which they are not authorised to do. Family Lawyers would be well advised in the meantime not to tick either boxes in section F to avoid that trap.”

Holly Coates is running a seminar on this report, its guidance and implications, on 17th March 2020. Please contact the clerks for more information.

[1] https://www.nuffieldfoundation.org/sites/default/files/files/Guide_To_The_Treatment_of_Pensions_on_Divorce-Digital(1).pdf

[2] See paragraphs V.41-V.44