More and more people in Ireland are getting divorced. Along with the family home, pension funds can be the biggest asset that is divided between the separating couple. In the case of couples who divorce later in life, one spouse may have accumulated a large fund for retirement while the other has nothing at all. So, what happens to pensions in divorce?
When the Courts make an award, it is called a Pension Adjustment Order (PAO). It can be made in two circumstances:
A PAO can be applied for by a spouse, civil partner or cohabitant under a judicial separation or divorce.
It can be sought in relation to pensions at any time on or after the relevant decree provided the spouse has not remarried or entered into a new registered civil partnership. In the case of a dependent child, that child must still be dependent.
In the case of death in service benefit, the application for a PAO must be made within 12 months of the relevant decree provided the spouse has not remarried or entered into a new registered civil partnership. In the case of a dependent child, that child must still be dependent.
The amount awarded is given as a percentage, never as an amount. The factors in decided the award are:
Legislation does not allowed for an award to be given of no value. In the situation where the pension benefits are not to be divided, what is called a”Nil PAO” is awarded. A award of 0.0001% of 1 day benefits is given, which is worth nothing.
When the award is given, the trustees or life company are notified and it is noted on their policy. The spouse can then:
In some circumstances, the trustees may transfer the benefits out of the scheme without the spouse’s consent.
The PAO will cease if the spouse remarries or enters into a registered civil partnership. The death in service benefit will cease if the ex spouse leaves their employment which provides the benefit.
When it comes to calculating the Revenue maximum allowable fund, the value of the fund awarded to the ex spouse it still included.
Example
Pension Adjustment Orders are extremely complex. Professional advice should be sought in all circumstances. If you have any questions, please email me directly at steven@bluewaterfp.ie