After children, the most common question clients ask us is how assets will be split in a judicial separation or a divorce. What clients often overlook is that pensions are typically one of the biggest assets held by a married couple.
How is a pension dealt with in a separation or divorce?
A pension is an asset and is therefore considered when assessing a couple’s marital assets.
When judicial separation or divorce proceedings are commenced, the Pension Trustees of any private pension held by either spouse must be notified of the proceedings. This applies whether a spouse still pays into the pension, or it is inactive.
A Court must make Orders for proper provision for parties in a separation or divorce. It will consider all the assets held by the parties. The Courts prefer leaving pensions intact where possible if proper provision can be made from the other marital assets.
For example, a couple may have a house worth €500,000 mortgage free and it is to be sold. One spouse has a private pension worth €100,000 at the date of the divorce hearing. Broadly speaking, the joint marital assets are worth €600,000 and each party is entitled to €300,000. If the Court deems 50:50 is proper provision, it will not necessarily make a Pension Adjustment Order for 50:50. It might decide to make a Property Adjustment Order giving the pension-holding spouse €200,000 from the sale of the family home and make a nil Pension Adjustment Order. The other spouse will get €300,000 from the sale of the family home.
Common mistakes regarding pensions and divorce
Sometimes it is only one spouse has a pension and the other spouse does not think they are entitled to any of their spouse’s pension.
It is important to know that it is possible as part of a family law matter for your pension to be split.
People sometimes think that if someone has €100,000 in a pension fund and they want to have a pension split of 50% that they will receive €50,000 in cash.
It is not possible to get €50,000 of that pension and convert it to cash. It can stay in the original pension fund or can be transferred from one pension fund to another but can only be accessed once conditions of release (usually reaching retirement age), are met.
Also, your pension cannot be split without an order of the Court. Pension Trustees are not bound by private agreements between parties such as Deeds of Separation.
There is also no obligation for there to be any Pension Adjustment Orders. Parties also do not have to end up with the same percentage of a pension as non-pension assets. It will all depend on what the Court considers to be proper provision for each of the parties and that will be different in every case.
Seeking advice on pension entitlements
Seeking legal advice on your pension or your spouse’s pension is important. After a house, a pension is usually one of the biggest assets held by a party. There are rules around pension schemes and legal formalities to be completed after a decree of judicial separation or divorce that need to be followed to ensure a pension is properly dealt with.
If you have any questions regarding pensions and divorce in Ireland, please contact us on (061) 467 392 and we would be happy to assist you.