What is a Pension Adjustment Order – and When Is It Necessary?
A pension adjustment order is an order of the court directing that a portion of one spouse’s pension is paid to the other spouse. It may be used to ensure proper provision*. It is only available after a decree of judicial separation, divorce, or dissolution is granted.
*See also our Guide to Transferring Property after Divorce
It is important that you get legal advice from a solicitor who has expertise in this field of law.
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The ‘Relevant Period’ and ‘Relevant Percentage’
A pension adjustment order must specify a relevant period and relevant percentage.
The relevant period refers to the time period during which the pension benefits are calculated for division. Usually, the relevant period will begin at the start of the spouses’ relationship or marriage and will end on the date of separation or the date of the decree of divorce or judicial separation. Only pension benefits built during this relevant period will be shared.
The relevant percentage refers to the portion of benefits earned during the relevant period that will be awarded to the non-member spouse.
Retirement Benefits vs Contingent Benefits
Retirement benefits refer to the monthly pension payments or lump sums that will be paid in the future when the member spouse reaches the age of retirement or leaves employment.
An order relating to retirement benefits may be made at the same time as the decree is granted or at any time during the member spouse’s lifetime.
Contingent benefits are benefits paid if a specific event (i.e. death) occurs while the member spouse is in employment. This is paid to the surviving spouse or any dependent children. Contingent benefits are usually paid by way of lump sum. A pension adjustment order can secure a share of that lump sum for a former spouse.
It is important to note:
- An order relating to contingent benefits must be made within 12 months of the granting of the decree of judicial separation, divorce, or dissolution.
- A separate pension adjustment order is required for retirement benefits and contingent benefits.
- A non-member spouse who has remarried may no longer make an application for a pension adjustment order.
The Process: Notifying Trustees and Serving the Pension Adjustment Order
The spouse applying for the pension adjustment order is required to give formal notice to the trustees of the pension scheme.
The court must have regard to any representations made by the trustees in determining whether to make a pension adjustment order, and in determining the provisions of any such order.
The trustees must be notified at least 14 clear days before the hearing.
Once the pension adjustment order is granted by the court, the order must be served on the trustees. This allows the trustees to implement the court ordered division of benefits.
Transfer Options: Leaving the Fund in Place vs Moving to a New Policy
Once a pension adjustment order has been implemented, the receiving spouse will have the option to stay within the existing scheme or transfer the value of their portion to a new policy. Leaving the fund in place may mean less control as they are tied to the original scheme’s rules. Moving to a new policy may offer greater independence and more control over investments.
Ultimately, the best choice will depend on the individual’s circumstances and each policy.
Get legal advice from Michael Burns of MB Solicitors who has expertise in this area of both Family Law & Pensions / Property Adjustments.
Use the Enquiry Form below – or phone Michael Burns on +353-1-567 7343.