A Pension is considered an asset of a separating couple. The court can order that a pension be divided into whatever shares it considers appropriate or necessary. This is order is known as a Pension Adjustment Order.
The most common example is where one spouse has a substantial pension and the other spouse has none. It will often be the case that the spouse who has stayed at home as the homemaker has no pension and therefore the court will and can order a part of the spouse’s pension to be paid to the other spouse or to a dependent child.
Before making any such pension adjustment order the court considers all the financial resources available to the couple and may for example decide not to make a Pension Adjustment Order
and instead award the other spouse a greater share of the family home or perhaps a lump sum payment if a lump sum is available.
Generally however a Pension Adjustment Order will be made so as to provide as much security as possible for the parties as they get older. Each case depends on its own circumstances.
When a pension adjustment order is granted by a court it is then served on the trustees of the spouses or civil partner’s pension scheme, who make the necessary changes to the provisions of the scheme.
The trustees are not entitled to alter the terms of a pension purely at the request of the pension holder. The trustee must follow the terms and conditions of the pension scheme or follow a court order. Therefore a Separation Agreement which deals with the pensions will not be enforceable or binding on the trustees of the pension fund. A Judicial Separation Order or Divorce Order however is legally binding on them.
Types of Benefits and Pension Schemes
There are two main types of benefits:
- Contingent Benefit
A Contingent Benefit is also known as a death in service benefit and is a benefit payable under a pension scheme to a widow or widower and/or to any dependent child upon the death of the member spouse while the deceased was still in employment.
- Retirement Benefit
This is a benefit payable under a pension scheme to a member of such scheme who retires. It may also be payable to a widow or widower or to any dependent child on the death of the retired member.
There are two main types of schemes:
- Defined Contribution Scheme
This is where a defined percentage of the insured person’s salary is paid into their pension scheme. Contributions are usually made by both employer and employee. The benefit amount is determined by the amount of contributions paid into the scheme.
- Defined Benefit Scheme
Under this scheme the level of pension is paid to an employee on retirement and is calculated by reference to the salary received up to the date of retirement and the length of employment.
Important points regarding Pensions:
- Either spouse may apply for a pension adjustment order for his or her benefit or for the benefit of a dependant child
- A third party may apply for an Order for the benefit of a dependant child
- An Order cannot be made for the benefit of an Applicant who has remarried
- An Order in respect of a contingent benefit can be made both for the benefit of a spouse and a dependant child
- An Order in relation to a retirement benefit can be made at the time of the granting of the Decree of Judicial Separation or Divorce or at any time thereafter during the lifetime of the spouse who is a member of a pension scheme.
- An Order in relation to a contingent benefit cannot be made more than one year after the making of the Order of Divorce or Judicial Separation.
Q. I want to ensure my ex-spouse does not have a claim on my pension, what should I do?
A. As part of your judicial separation or divorce you should advise your solicitor that you want a Pension Adjustment Order that awards your ex-spouse either nothing or a nominal sum.
Q. I signed a Deed of Separation, is my ex-spouse entitled to a share of my pension?
A. Yes, if your pension specifically states your spouse is entitled to a share, then only a judicial separation/divorce order allows you to change the terms of the pension.
Q. How much does it cost to obtain a Pension Adjustment Order and how long will it take?
A. Pension Adjustment Orders form part of your separation/divorce proceedings. Depending on each individual’s circumstances this can take from six months to two years and can cost from €2000 upwards.