advertorial Marital breakdown and your pension
Paul Kenny, the Pensions Ombudsman, is currently highlighting the need for the parties involved and particularly financial and legal advisors to pay close attention to the area of Pensions Adjustment Orders (PAOs) in judicial separation and divorce proceedings. “PAOs are made to enable a pension benefit that belongs to
one person to be paid to another person, and it has to be done that way because the trustees cannot – under the law and the rules of the pension scheme – pay a benefit to ‘A’ that was properly belonging to ‘B’,” says Kenny. The Pensions Ombudsman points out that the number of complaints received in his office concerning PAOs has steadily increased over the past number of years, and under the Civil Partnership Act, these orders can also be applied for by separating civil partners and qualified
cohabitants.The Pensions Ombudsman expressed his concern that this could result in even further difficulties for trustees and pension administrators, regarding whether a former partner is ‘qualified’ for pension purposes. There are two kinds of order: an order on pension benefits is
anything that is payable at or after retirement, including payment on death after retirement; contingent benefits on the other hand are benefits that are payable on death before retirement and are the subject of a separate order.
PAOs put before the courts are often drawn up in the heat
of the moment and thus might be badly constructed and impossible for trustees to implement.“This is the critical issue – if the trustees cannot act on them, they are not worth anything, regardless of any underlying good intentions,” says the Pensions Ombudsman. An incorrectly drafted PAO can cause problems for pension administrators and family lawyers alike; however, the real problems are for the appointed beneficiary.“Ordinary legal practitioners generally won’t have the specialist knowledge to deal with the complexities of pension matters,” he says. Kenny added:“When it comes to public sector pension schemes it can become even more complicated. In the public service, because the spouses and children’s pensions are dealt with by a completely different scheme from the main scheme, you may need two orders for each of the two schemes: one to deal with death before, and the other to deal with retirement and after. Then if there’s an additional voluntary contribution scheme running alongside, you’ll need two more orders for that, so you could have up to six orders in the case of the public sector worker,” says Kenny. However, he recommends that if one or both of the parties are entitled to substantial pension benefits then it really does pay to get advice from a specialist family lawyer.
The Pensions Ombudsman, Paul Kenny, suggests that financial and legal advisers pay particularly close attention to the area of Pension Adjustment Orders in judicial separation and divorce proceedings. Under the Civil Partnership Act, these Orders can also be applied for by separating Civil Partners and Qualified Cohabitants. A pension can be comprised of several individual components – some payable at or after retirement, some on death before retirement and the Court’s order must be very specific in relation to each part. In certain instances in the public sector, up to 6 different orders might be needed. In addition, the orders must be capable of being implemented by trustees and trustees must always be formally served with a decree once it has been made.
"It is sometimes only when one of the parties has died that a PAO comes under detailed examination by experts in the pensions area and this may be too late. Regardless of any clear intention at the time, if the PAO is not correctly drafted or has not been served on the trustees, it is worthless. When you take account of the true value of a good pension benefit, it’s not something to be left to chance. " – Paul Kenny, Pensions Ombudsman
36 Upper Mount Street, Dublin 2 Phone: (01) 6471650 E-mail:
info@pensionsombudsman.ie Website:
www.pensionsombudsman.ie
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