The pension equalization serves to equalize the pension rights acquired during the marriage. Particularly in the case of a longer marriage, the spouses’ pension claims against the pension providers represent a significant part of their assets. The legislature attaches such importance to the pension equalization in the context of the divorce that the pension equalization must always be carried out ex officio, unlike the regulation of maintenance matters, marital housing and household matters as well as property law matters.
This means that the pension equalization in the context of divorce proceedings is always automatically decided by the family court, while a claim to child and spouse maintenance or to profit equalization is only examined by the family court upon separate application.
The principle is the equal division of the pension entitlements acquired according to the so-called half-division principle (§ 1 VersAusglG). The aim is to ensure that the person entitled to compensation is provided to live as independently as possible. This is particularly important if a spouse was not employed during the marriage and therefore has hardly any or almost no pension entitlements of his own. The entitlements acquired as part of the pension equalization are then directed directly against the pension provider and are independent of the person liable for equalization.
Only the pension entitlements that were acquired during the marriage, from the date of the marriage up to the filing of the divorce, are offset.
What types of compensation are there exactly?
The pension adjustment takes place in two basic forms:
- The value equalization in the context of divorce (so-called public-law pension equalization)
- The compensation of entitlements after the divorce (so-called contractual pension compensation)
The value equalization in the context of divorce is the basic form of pension equalization. If, for example, both spouses have only acquired pension entitlements from the German statutory pension insurance, these will be divided and transferred to the other spouse.
A compensation of entitlements after the divorce may be necessary if the spouse has acquired foreign pension entitlements.
Is there also a pension adjustment if the spouse is a foreign citizen?
The pension adjustment does not require that both spouses are German. According to Art. 17 Para. 3 EGBGB, the pension equalization is subject to the law applicable to the divorce. If German law applies, the pension adjustment is also subject to German law if one of the spouses is German.
If, however, both spouses are foreigners, the first thing that matters is whether the law of the country of which the two spouses are citizens is familiar with the pension equalization (e.g. in the case of Switzerland). If this is the case, the pension adjustment will be carried out in accordance with the statutory rules. If this is not the case (as it is the case in most foreign countries), the pension adjustment is not necessary. However, the pension equalization can be applied for if one of the spouses has acquired entitlements from a German pension provider, provided that the implementation of the pension equalization does not contradict fairness, especially in regard to the mutual economic situation during the entire marriage period.
Are foreign entitlements subject to pension adjustment?
In principle, foreign entitlements are always subject to pension equalization. They are only ignored if a spouse has acquired foreign entitlements and these cannot be perceived in Germany and it is not to be expected that they will be perceived by returning to the country of entitlement.
According to § 19 (2) No. 4 VersAusglG the foreign entitlements exist but cannot be compensated at this time. The spouse entitled to compensation is referred to the compensation under the law of obligations after the divorce.
This means that after the divorce he has to take care of realizing his claims himself. He can then wait until retirement age to assert his claims.
However, the risk that the spouse entitled to the equalization will go empty-handed in the contractual pension equalization is relatively high. It starts with the fact that the person obliged to pay compensation may then no longer be found. Corresponding proceedings often take a long time and it is complicated to enforce a title abroad. It is possible that the person obliged to pay compensation was paid out, has spent the money and now has no enforceable income or assets.
What alternatives are there?
1. Non-compensation “ex officio”
There is the possibility that, in the case of foreign entitlements of one spouse, the entitlements of the other spouse will not be settled within the framework of the public-law pension adjustment during the divorce, if this would be unjust for the other spouse (§ 19 (3) VersAusglG). If there is inequity the foreign entitlement cannot be compensated.
2. Exclusion of the pension adjustment
There is also the possibility of reaching agreements on pension equalization between the spouses. If there are approximately the same amount of entitlements on both sides, it may make sense to agree to an exclusion of the pension adjustment. However, it is necessary to determine the exact amount of the entitlements in order to avoid unfair results. Both spouses have a right to information and documentation about the existence and amount of the other’s pension entitlements.
3. Claiming a severance payment
Under certain circumstances, the spouse entitled to compensation can also claim a severance payment. The payment of a severance payment must, however, be reasonable for the person liable for compensation. When evaluating foreign pension rights, the so-called transfer loss must also be taken into account.
4. Division of pension entitlement abroad
Under certain circumstances, the foreign entitlement can also be divided directly by a procedure in the country concerned, in particular in Switzerland. In terms of procedural law, the pension equalization is separated from the divorce process until the foreign entitlements can be divided in Switzerland.
There are numerous options on how to compensate pension rights during and after the divorce. The multitude of design options and their advantages and disadvantages is often not clear, so that competent legal advice in this area seems essential.