pension adjustment orders

The benefits payable arising from a pension scheme can only be paid in accordance with the terms of the scheme. This means that an individual member cannot change the terms or pay-outs under the scheme, even if the trustees agreed (which will not be the case).

Therefore, a deed of separation between separating spouses that purports to make changes to the pension scheme will simply not work. The only way that a scheme can be changed is with a pension adjustment order (PAO) granted by a Court.

This is done pursuant to section 12 of the Family Law Act, 1995.

If the parties to a failed marriage agree terms on which they will divorce they will need a pension adjustment order from the Court to change the retirement or contingent benefit to which one of the parties is entitled under the pension.

The powers of a Court in this regard are contained in section 12 of the Family Law Act, 1995 and section 17 of the Family Law (Divorce) Act, 1996.

Pension adjustment orders provide a further mechanism by which a court can try to ensure proper provision is made for the spouses and dependent children in a divorce.

A pension can be viewed as an asset of either party and can be divided or transferred from one party to the other. It can also be used as a way of ensuring maintenance is paid by one party to the other.

The power to make a pension adjustment order is only available after the granting of a decree of judicial separation or divorce. A separation agreement cannot make any change to a pension.

Any court application will require the trustees to be put on notice. If they are, and their agreement to an order is obtained in advance, the costs of having trustees attend court will be avoided.

The recommended practice, therefore, is for the parties to agree the form of pension adjustment order with the trustees of the pension. The trustees will give a letter approving the draft PAO which will then be handed into Court when the application is made. A court will require details of the pension scheme and the trustees of the scheme.

Different types of pension scheme

There are two broad categories of pension scheme:

Occupational pension schemes; and
Self-employed schemes

Occupational pension schemes

Occupational pension schemes can be broken down into

Defined contribution schemes and
Defined benefit schemes

Where financial relief is being sought pension details should be provided in an affidavit of means which should set out the nature of the scheme, benefits payable, normal pensionable age, and period of reckonable service.

Defined contribution scheme

A defined contribution scheme is one where the employer and/or employee pay a percentage of the employee’s salary into the scheme. This is then invested by the trustees.

Self-employed schemes generally fall into this category.

Defined benefit scheme

This type of scheme where a specific level of pension is supposed to be paid to the employee on retirement, usually a percentage of the employee’s salary. The pension scheme operated by the Civil Service would be an example of such a scheme.

The pension adjustment

There are two aspects to pension adjustment:

Ear-marking and
Pension splitting

Ear-marking means a portion of the pension benefit should be paid to the other spouse.

Pension splitting means that a percentage of the retirement benefit of a pension is used to provide a separate pension for the other spouse. This could be provided in the same pension scheme, or a separate one.

A period and percentage

A pension adjustment order in respect of a retirement benefit will specify two things, at least:

A period and
A percentage

The period is the period of reckonable service of the member prior to the divorce or judicial separation. This should state the commencement date and cessation date.

The percentage will be the percentage of the mount of the benefit to be paid to the other spouse on foot of the order. This can run from .001 per cent to 100 %.

It is worth noting that a pension adjustment order can only be made in favour of a spouse or a dependant but cannot be made in favour of a spouse who has remarried. An application cannot be made for a pension adjustment order in respect of a contingent benefit after 1 year has passed after the divorce or judicial separation.

Nominal pension adjustment orders

The law does not make provision for a “nil” order so the usual thing is a nominal pension adjustment order for a period of one day, at the beginning of the period of reckonable service, a percentage of 0.01 per cent or less.

Pension splitting

Where an order is made regarding a retirement benefit payment could commence immediately if the retirement benefit had already commenced being paid to the member spouse. This would apply where the member spouse had retired.

Where the member spouse has not retired, and the payment of retirement benefit has not commenced, the applicant spouse has 2 options:

She may leave it in the pension scheme, and it will become payable when the member spouse retires
The applicant spouse can have an amount of money transferred from the scheme, which would equal the value of the designated benefit

A spouse who has obtained a pension adjustment order in respect of a retirement benefit may apply to the trustees for pension splitting at any time from the date of the order to the date of commencement of the payment of the designated benefit. The trustees must value the percentage of the retirement benefit for payment to the applicant spouse.

Once this is ascertained the trustees can

Hold the transfer amount within the scheme for the benefit of the applicant spouse or
Pay the transfer amount to another pension scheme or approved arrangement-for example, a buyout bond

Any applications to court in respect of a pension adjustment order, or any other order regarding a pension, obliges notice to the trustees of the scheme.

Once an order is made by court in respect of a pension the order should be served on the trustees of the pension scheme.

Conclusion

Pension adjustment orders can be a complex, complicated area of divorce or marriage breakdown. It is often the case that lay litigants can manage to obtain a divorce without the aid of legal assistance but require it for the subsequent pension adjustment order applications.

The Family Law Courts in Ireland have considerable powers to make additional orders, called ancillary orders, in divorce and judicial separation proceedings under the Judicial Separation and Family Law Reform Act, 1989 , the Family Law Act, 1995 (judicial separation proceedings) and the Family Law (Divorce) Act, 1996 (divorce proceedings).

The main factor determining these orders is the need to make “proper provision” for spouses and dependent members of the family.

The Courts also have the power to make preliminary orders in relation to judicial separation and divorce proceedings and these will be granted before the full hearing involving divorce or judicial separation.

An example of such a preliminary order is called a maintenance pending suit order which allows for maintenance payments to be made prior to the hearing of the divorce or Judicial separation proceedings. Domestic violence can also be dealt with through a preliminary order.

Custody and access orders

Custody and access arguments can be dealt with by way of preliminary order also as well as at the substantive hearing of the proceedings. Remember though that orders concerning access and custody can be obtained even where divorce or judicial separation proceedings are not contemplated under the Guardianship of Infants Act 1964.

It is worth noting also that even where divorce takes place a divorced person can still avail of relief under the Domestic Violence Act, 1996 even though ordinarily the person would not be considered to be a spouse in the eyes of the law once the decree of divorce is granted.

Financial Provision on Marriage Breakdown

Financial provision can be made on the breakdown of a marriage under the following broad headings:

maintenance
property
succession.

Maintenance

The common law duty for spouses to maintain one another is continued in the legislation covering marital breakdown and survives the ending of the marriage. The liability to maintain a former spouse only ends when that spouse dies or remarries.

This duty continues despite the execution of a separation agreement or an order of judicial separation or divorce.

Three types of maintenance order can be made under the Family Law Act, 1995:

a periodical payments order
a secured periodical payments order
a lump sum payment order.

The Family Law Act, 1995 also allows a court to make an attachment of earnings order at the same time as the making of a periodical payments order without any default in payment having taken place.

All ancillary relief orders will be granted by the Court in the light of ‘proper provision for each spouse and for any dependent member of the family…’

Learn more about maintenance orders here.

Property-The Family Home

The Family Home Protection Act 1976 describes the family home as “primarily a dwelling in which a married couple ordinarily reside”.

When a marriage breaks down in Ireland and divorce or judicial separation proceedings are instituted the family home will loom large in considerations as for many couples it is the principal or only asset that they have.

Property Adjustment Orders and Preliminary Orders

Courts can make property adjustment orders in separation or divorce proceedings; in fact they can also make preliminary orders in respect of the family home which are orders which predate the hearing of the legal proceedings.

Courts have the power to make the following orders on separation or divorce :

I. Preliminary orders (effective until the hearing of the judicial separation or divorce proceedings)

II Property adjustment orders

1. The property to be transferred from one spouse to another or to another person

2. The reduction or extinguishment of any interest that a spouse has in the property

3. The settlement of the property to either spouse

However no order can be made in favour of a spouse who remarries and an application for a property adjustment order must be made during the lifetime of the other spouse.

The Courts can also order the sale of the family home but cannot do so if one of the spouses remarries and is living in the home with his/her new spouse.

All property adjustment orders can be varied except an order directing the sale of the family home and this has been carried out.

Property adjustment orders can also be made in respect of all types of property, not just the family home.

Succession rights

A spouse has an entitlement under the Succession Act, 1965 to one half (if there is no children) or one third (if there is children) of the deceased spouse’s estate.

However the Judicial Separation and Family Law Reform act 1989 allowed for the first time the extinguishment of the share to which the spouse would be entitled under the Succession Act, 1965 but only provided proper provision has been made for the spouse losing their succession entitlements.

This of course only applies in Judicial Separation cases as in divorce cases the “spouse” is no longer a “spouse” after divorce and loses Succession Act entitlements automatically.

However the Court will generally make allowance for this loss by making what it considers the necessary ancillary orders on granting a decree of divorce.

Pension adjustment orders

The Family Law Act, 1995 allows the making of a pension adjustment order which aims to allow the distribution of pension benefits by disregarding the terms of the pension scheme and either party can apply for this order.

However if you remarry you are prevented from applying for such an order.

It is important to note that any attempt by a separating couple to divide the benefits of a pension scheme between them will not work and will have no effect. Regardless of what an individual member of a pension scheme wants, the trustees of the scheme are obliged to be bound by the terms of the scheme.

If the parties come to agreement in relation to the pension then they will need an order of Court to effect that agreement and this can only be done after the granting of a decree of divorce or judicial separation by way of an order of Court.

If separating couples execute a deed of separation between themselves then they are depriving the Court of making an order in respect of the pension.

The recommended procedure would be to agree the terms of agreement between spouses, issue proceedings under the Judicial Separation and Family Law Reform Act, 1989 and an application to have the settlement terms made an order of Court and the relevant pension adjustment order made on consent.

Factors the Court Considers When Making Orders on Divorce and Judicial Separation

The factors the Court will consider when making these orders are

I. The actual and potential financial resources of both spouses

II. The actual and likely financial needs, obligations and responsibilities of both spouses

III. The standard of living of the spouses before the separation or divorce

IV. The length of marriage and the ages of the spouses

V. Spousal contributions-this is increasing in importance in the Court’s considerations and looks at not just financial contributions but time spent looking after home and family

VI. Earning capacity or lack of it due to time spent in the home due to marital responsibilities and the lack of future earning capacity due to the sacrifice of career made during marriage

VII. Statutory entitlements-any benefit or income either spouse is entitled to in law

VIII. Conduct-this is not a hugely important factor unless the conduct is egregious

IX. The accommodation needs of both spouses

X. Any separation agreement entered into by the spouses and which is still in effect

All of these factors will be considered under the overarching goal of attempting to ensure proper provision is made for both the spouse and any dependent members of the family.

It is noteworthy that even where there is a full and final settlement clause in the divorce the Courts can still make a change to any maintenance order as in Irish law there is really no “clean break”.

Procedure in the Circuit Court and High Court

The Circuit Court and the High Court have jurisdiction to hear

applications for divorce
decrees of judicial separation
applications for orders under the Family Law Act, 1995
applications for decrees of nullity.

Most of these proceedings will be commenced with a Family Law Civil Bill (Circuit Court) or Family Law Summons (High Court).

Where financial relief is sought it will be necessary to file an Affidavit of Means. Where there are dependent children involved, regardless of whether financial relief is sought, an Affidavit of Welfare must be sworn and filed.

Discovery

Discovery is the procedure whereby both parties obtain full and detailed information about the other’s income, debts, assets, and liabilities. There are strict rules in the Circuit Court and High Court in relation to discovery.
By Terry Gorry
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