Pensions and family law
On judicial separation and divorce, the courts may designate and/or transfer part of one spouse’s pension benefits to the other. The court order is a pension adjustment order. A pension adjustment order is available to a spouse, dependents and civil partners. A pension adjustment order may overrule the terms of the scheme.
The spouse or other for whose benefit a pension adjustment order has been made, may either take the payment out into another scheme or structure or leave it in the scheme earmarked for his or her benefit. In some circumstances, the benefit is automatically split without an option
Some older schemes may exclude the spouse if he or she ceases to cohabit or is judicially separated. Divorce terminates the relationship of husband and wife so that neither is the spouse of the other. Accordingly, they may thereby cease to qualify for the spouse’s element of the pension benefits.
There is provision for a court in judicial separation proceedings, to relieve the applicant from the operation of such a provision. There are provisions generally for overriding the spouse and dependent provisions under a pensions scheme by an order in judicial separation or divorce proceedings.
Pension Division Issues
Pension scheme benefits cannot usually be split apportioned or dealt while they are accruing or prior to payment, on the authority of the member only. Benefits may not yet be vested under the terms of the scheme., while there are discretions and options which have not yet been exercised.
The benefits under a pension scheme are defined by the terns of the trust deed. There may be benefits for members, their spouses and dependents. Entitlement to death in service lump sums will depend on the scheme rules. There may be an element of discretion in relation to whom, payment is made.
The member may have options to take an annuity on retirement, with or without the option of a surviving spouse’s pensions. There may be an option to take a lump sum and or and Alternative Retirement Fund. The lump sum is generally a multiple of salary, up to a maximum amount.
There is a range of pension and lump sum benefits, that may arise on death in service or death in retirement for the pension holder’s spouse. The trustees may have a discretion as to the payment of the benefits on the member’s death. A separated spouse may be entitled to be considered in the exercise of the trustee’s discretion.
There may be a nomination form or letter of wishes, signed by the member, which nominates a person or persons, to whom the benefits should be made. This may or may not have legal effect, depending on the scheme terms.
Court Order Usually Necessary
A court order is usually necessary to adjust or sever scheme benefits for the benefit of the member’s spouse or dependents. The order can require to be done, that which is outside the terms of the pension trust. It gives the trustees authority to do what if otherwise be a breach of their duties.
A practical consequence is that a court order may be necessary, where it would otherwise be unnecessary. Most other issues in a judicial separation can be resolved without a court order. A divorce and dissolution of marriage requires a court order.
The court order may be made in by the court pursuant to an agreed application where all matters are agreed. The courts have duties in making family law orders, in particular in relation to provision for children of the marriage. However, if the proposal is agreeing and is reasonable in the interests of all relevant parties, the court is likely to approve it and make the proposed order.
Relief of Trustees and Costs
When making a pension adjustment order, the court may give directions to trustees of the scheme, as it considers appropriate. These directions may authorise the trustees to do acts, notwithstanding that they may constitute breaches of the scheme. The trustees may be immunised by the terms of the order.
Costs incurred by the trustees are borne by either or both of the spouses, as the court determines. In the absence of the court determining the matter specifically, the costs are borne equally. The costs include the cost of complying with notices, making representations to court complying with the adjustment order and compliance cost.
Where the costs are not paid, the trustees may apply to the court to have the amounts deducted from the benefit.
There are extensive obligations to disclose information. Certain rights to disclosure of information rights apply in favour of spouses. They may continue to apply, notwithstanding separation or proceedings for a judicial separation or divorce.
In addition to the information required under the disclosure of information regulations, an order may be made by the court directing that the trustees furnish a calculation of the value of the member’s pension benefits.
In Circuit Court judicial separation and divorce proceedings, parties are obliged automatically to file an affidavit of means, in cases where financial relief is sought. Apart from this, an order of discovery may be obtained in the context of judicial separation or divorce for documents relevant to the income and means of the party is usually made.
An application can be made to direct trustees to furnish information, including a valuation of benefits that have accrued. The court may of its own initiative, direct a valuation. It must do so if either spouse requests. The cost of valuation is borne by the spouses.
An application may be made for an interim order to prevent a party disposing or transferring pension benefits, before a pension adjustment order may be made. The court may restrain the member from taking action. It may restrain the trustees.
The court will grant a restraining order, only if it is satisfied the member intends to defeat the claim by transferring assets or by putting them outside of the control of the court, for example, by putting them outside the jurisdiction. It must be shown that the member intended to defeat the claim by making the relevant disposition.
Pension Adjustment Order
A pension adjustment order is one of a number of orders that may be granted by a court on divorce or judicial separation. It may relate to any scheme, policy or arrangement that provides for retirement benefits at pensionable age or later, or benefits for spouses, dependents or others.
Pension adjustment orders can be made in respect of an occupational pension scheme PRSAs, ARFs, and personal pensions. Life insurers and PRSA providers may be directed to split benefits. Social welfare benefits are set be statute as they arise due and they cannot be split. ARFs are beneficially owned and may be the subject of a property adjustment order in divorce or judicial separation.
Generally, the calculation and practical issues will be simpler under a PRSA, personal pension or ARF, than those arising under an occupational scheme. Defined benefit schemes are more complex than defined contributions schemes.
The court may adjust pensions accrued to the date of the judicial separation or divorce. Benefits arising from future membership are not severable. This limitation does not apply to death in service benefits, which are usually insured or “risk” benefits.
The criteria for granting the order in the judicial separation or divorce proceedings, take account of the totality of the means and requirements of the spouses. In some cases, other assets may be adjusted, and the pension left intact. However, the value of the pension will be reflected in the context of the overall court order or settlement.
Adjustment Orders Issues
A pension adjustment order re-allocates pension benefits in favour of a spouse. It may be made prior to retirement or in retirement. Where the member has retired, it may split the retirement fund or benefit, with immediate effect. Where it is made prior to retirement, the spouse in whose favour it is made receives the deferred benefit of all or more commonly, part of the other spouse’s / member’s retirement benefits. It takes effect on retirement in accordance with the scheme terms.
The pension trustees must be put on notice of an application for a pension adjustment order. They are entitled to make representations in relation to it. The application may only be made during the lifetime of the member. If the potential applicant remarries, the application may no longer be made.
An adjustment order may be made in favour of a spouse or a dependent member of the family. This may be a child or person in respect of whom, the spouses are in loco parentis (in place of the parent). Dependents include a child under 18 years or a child over 18 years of age in full-time education or who is physically or mentally disabled and not able to maintain himself fully.
A pension adjustment order may be varied on application to the family court. The court has the power to vary or discharge an order. The application for variation may be made by either spouse or by a party with an interest arising on the death of the spouse. An application can be made by a person on behalf of a dependent child. The factors that apply to the making of the original order apply to the discharge and variation of the order.
The pension adjustment order does not split the benefit, at least until it becomes fully vested or payable. The spouse may apply to the trustee to split the benefit before that time. The particular circumstances will determine the more advantageous option for the spouse. The spouse only may apply. Dependents may not do so.
In order for a pension to be split, there must be a pension adjustment order in place. He / she must furnish the trustees with the requisite information. The application to split must be made prior to the pension becoming payable. Where a pension is split, its value or actuarial value is earmarked for the applicant spouse or dependents. The pension becomes payable regardless of what happens to the member.
Retirement benefits only may be split. Death in service pre-retirement benefits may not be split. The splitting of benefits creates an independent benefit for the applicant spouse.
The independent benefit can exist within the scheme or by transfer out to the scheme. The transfer may be by way of a buyout bond.
If the trustees and the spouse agree, the new benefit may be held within the pension scheme. If the trustees do not agree, the benefits must be transferred out to a new pension scheme or to a buyout bond. If the benefit is split, the treatment is as if the member left service on the date of the split. It will provide benefits equivalent to the value of the member’s fund, based on his or her age and on a notional calculation forward of the notional retirement salary.
Trustees Decide to Split
In the case of a defined contribution scheme, the trustees can decide to leave the benefit in the scheme or transfer it out. Unlike the case with a defined benefit scheme, the power is not limited to cessation of membership. The spouse and member cannot veto the decision.
Where the primary pension beneficiary ceases to be a member of the defined benefit scheme, other than on death, the trustees may split the designated benefit. The trustees may calculate the spouse or dependent child’s benefit as if a split had occurred and retain it in the scheme. Alternatively, they may transfer the benefit to another occupational scheme buyout bond or PRSA, if permitted. If they do not do so, the spouse may elect to split it.
If the benefits are not split, the designated benefits are attached to the member’s benefits and the normal transfer out rules apply. The member’s benefit may be retained in a scheme as a deferred pension or may be transferred out to a bond or to a new employer in the normal course. The trustees may retain the spouse’s benefit or require it to be transferred out separately.
The trustees are obliged to give notice to the spouse and the Registrar of the court where they elect to split the benefits. They are obliged to notify the spouse and the Registrar of the court within 12 months of the cessation, which may arise on termination of the scheme or termination of employment, where they have not split the benefits.
There is an automatic splitting of benefits under a pensions adjustment order in certain circumstances. This occurs where either the member or spouse dies before benefits commence, or the spouse dies after benefits commence. In these cases, the retirement benefits are split. The payment out is made on the basis that the designated benefit was split when the relevant event occurred.
Where the spouse dies before the benefit commences, a split is deemed to have occurred, and the benefit is paid to the personal representatives, within three months of the death of the spouse. If a spouse dies after the benefit commences and the member is alive, the value of the future pension payments accruing to the spouse are to be paid to the personal representative within three months.
If the member dies before the benefit commences, a lump sum death in service benefit may arise. There is deemed to be a pension split so that the trustees pay the spouse’s or the dependents’ benefit under the adjustment order as a lump sum to them. If there is another death benefit under the scheme, it may be reduced by an amount equal to the value of the benefits split in favour of the first spouse and dependents.
References and Sources
Irish Pensions Law & Practice Buggy, Finucane & Tighe 2nd Ed (2005) Ch.15
Pensions – A Handbook for the Family Law Practitioner: L Cahill (2013)
Pensions; Revenue Law and Practice (ITI) Dolan, Murray, Reynolds, McLoughlin (2013)
Trustee Handbook the Pensions Authority 5th Ed 2016
Statutory Guidance the Pensions Authority (Various)
Pensions Law Handbook 12 Ed Nabarro Nathanson Bloomsbury
Corporate Insolvency 6e: Employment & Pension Rights (6th Revised edition)
Occupational Pensions (Subscription) Lexis Nexis
Pensions Law and Practice with Precedents (Subscription) Sweet & Maxwell
Sweet & Maxwell’s Law of Pension Schemes (Subscription)
The Guide for Pension Trustees World Economics Ltd
The Guide for Pension Trustees website, you can:
Tolley’s Pensions Law Looseleaf Service (Subscription)
Pensions Act, 1990
Pensions (Amendment) Act, 1996
Pensions (Amendment) Act, 2002
Pensions (Amendment) Act, 2006
Social Welfare and Pensions Act, 2005 (Part 3)
Social Welfare Reform and Pensions Act 2006
Social Welfare and Pensions Act 2007
Social Welfare and Pensions Act 2008
Social Welfare (Miscellaneous Provisions) Act 2008
re and Pensions Act 2009
Social Welfare and Pensions (No. 2) Act 2009
Social Welfare (Miscellaneous Provisions) Act 2010
Social Welfare and Pensions Act 2010
Social Welfare and Pensions Act 2011
Social Welfare and Pensions Act 2012
Social Welfare and Pensions (Miscellaneous Provisions) Act 2013
Social Welfare and Pensions Act 2013
Social Welfare and Pensions (No. 2) Act 2013 49/2013
Social Welfare and Pensions Act 2014
Social Welfare and Pensions (No. 2) Act 2014 41/2014
Social Welfare (Miscellaneous Provisions) Act 2015 12/2015
Social Welfare and Pensions Act 2015 (Part 3)