What a pension adjustment order does
A pension adjustment order directs the trustees of a spouse's pension scheme to designate part of the retirement benefit, defined by a period of reckonable service and a percentage, for the benefit of the other spouse or dependent children. Orders can be made over retirement benefits and separately over contingent death-in-service benefits. The designated benefit can typically be left in the scheme or transferred out to arrangements in the other spouse's own name, which affects investment control and timing of access.
Defined benefit versus defined contribution
The two families of scheme behave differently in divorce. A defined contribution fund has a statable value: the fund is worth what it is worth, and the argument is about the percentage. A defined benefit entitlement, common in public service employments, promises a future income stream whose capital value depends on actuarial assumptions, and competing actuarial valuations can differ significantly. In substantial cases an actuary's report is not optional.
Pensions as the balancing item
In asset-heavy but cash-poor cases, farms above all, the pension is often the instrument that makes a settlement possible: the land stays intact and the non-owning spouse receives a larger share of pension wealth instead. Whether that trade is sensible depends on the ages of the spouses, the accessibility of the benefits and the reliability of the scheme, all of which should be examined rather than assumed. The tax treatment of pension benefits is a matter on which specialist tax advice should be obtained.
Drafting and procedure
Pension adjustment orders fail in practice when they are drafted loosely. The scheme must be correctly identified, the trustees put on notice, and the order served within the required time. Nil orders, orders designating a nominal benefit, are commonly made over each spouse's scheme to close off future claims where the settlement intends finality. Getting this detail right at the settlement stage avoids expensive corrective applications later.
Frequently asked questions
Can we just agree to split the pension between ourselves?
No. Pension trustees can only act on a court order. An agreement between spouses about pension sharing must be converted into a pension adjustment order to be effective.
Is my public service pension at risk in a divorce?
Public service pensions can be the subject of pension adjustment orders like any other occupational scheme, and because they are defined benefit entitlements their capital value can be substantial.
To discuss a matter in confidence, contact Richard O'Shea at Mary Molloy Solicitors, 2 Rose Inn Street, Kilkenny. Arrange a consultation. This page is general information, not legal advice.
Further reading on this topic
- Pension Adjustment Orders Explained: The Order That Only a Court Can Make
- Self-Administered Pensions and Divorce: When the Pension Owns the Property