Money Talks: I'm going through a divorce, how can I protect my pension?

With the appropriate professional legal and financial advice, you will hopefully achieve independent financial stability as soon as possible, writes Carol Brick

Money Matters: The legal division of wealth during the whole divorce process can bring about so much additional stress at an already very painful difficult time. Try your best not to worry.

I am in the throes of a messy divorce, and I have just learnt that the pension scheme I have worked so hard to fund all my working life is to be hit with a “pension adjustment order”. What exactly is this and is there any way to avoid it as my pension is my only main asset?

I am sorry to hear about your situation. The legal division of wealth during the whole divorce process can bring about so much additional stress at an already very painful difficult time. Try your best not to worry because with the appropriate professional legal and financial advice, you will hopefully achieve independent financial stability as soon as possible and happily move on to the next chapter of your life.

As part of general divorce proceedings, it is the court’s responsibility to decide how a couple’s assets are to be divided to make future provisions for both parties and the children of the marriage. When it comes to such legal negotiations, after the family home, Pensions are often the next most valuable asset. Unfortunately, in your case, your pension has now been made subject to a “binding” court order called a “Pension Adjustment order”. This order dictates that your pension administrator pays a certain portion of your retirement benefits and/or contingent benefits (See below) to your former spouse.

The family court is not always bound to grant a pensions adjustment order and may sometimes decide instead to make other financial orders relating to savings or the family home. But members of occupational pension schemes should remember that this type of investment for their retirement years can be treated like any other type of asset in a family law court.

Before making any decisions, the court would always consider all of 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 other assets.

The order will be served on the trustees of your scheme and your soon to be ex-spouse or beneficiary will then have 2 options. The first option is called “Earmarking” and this is where they will wait until you take your benefits from the scheme before they receive their part of the benefit. 

The second is where they “transfer out” their portion of the Pension benefit to another revenue approved scheme in their own name like a PRSA or a Personal Retirement Bond. The option to transfer out assumes the scheme is a funded scheme. (Public sector schemes are mainly unfunded for example, so a transfer would not be an option) 

A Pension Adjustment Order can also be made in respect contingent benefits under the scheme. Contingent benefits are any benefits payable if the scheme member dies while he or she is still in employment. This type of benefit will cease if the non-member spouse remarries, although retirement benefits will not. Applications made in relation to the contingent benefits must be made within 12 months of the divorce being granted.

Pension Adjustment Orders have now become part and parcel of separation and divorce proceedings in Ireland. It is very important to seek professional independent advice in this regard and ensure that you are aware of all your options.