Investment for retirement years can be treated like any other type of asset in a family law court, writes Laura Slattery.

When a marriage ends, negotiation begins. As a divorcing husband and wife and their solicitors calculate the value of each other's assets, the most obvious asset to consider may be the family home. But pensions can also be taken into account as the separating couple tries to reach a financial settlement that both can live with.

"If both spouses have worked and are members of occupational pension schemes, then what they might decide to do on divorce is make an agreement that neither will make a claim over the other person's pension at a future stage," says Mr John McCarthy of the Pensions Settlement Bureau.

But if one spouse wants a share of the other's pension after a judicial separation or divorce, they can apply to the court for a pensions adjustment order. This might happen in cases where the wife has stayed at home to look after the children and doesn't have any pension provision in her own right.

"For a lot of couples, their pension benefits would be their next most valuable asset after the family home, so it would be extremely important in the divvy-up after divorce," says Ms Mary Hutch, head of information and training at the Pensions Board, which receives a lot of enquiries on the subject, both from pension scheme members and from non-member spouses who want to know their entitlements.

For a court to grant a decree of divorce, it must be satisfied that proper financial provision will be made for the spouses and any dependants. The husband may agree or be required to pay maintenance to his ex-wife and any dependent children. But if he dies, the maintenance payments die with him and the ex-wife, who may be past retirement age by this stage, could be left without any financial support. Pensions adjustment orders solve this problem.

The order is served on the trustees of the scheme, who are required to pay a proportion of the benefits to the non-member spouse or for the benefit of a dependent member of the family. The percentage designated by the court applies to the pension, the tax-free lump sum and any death- in-service benefits under the scheme.

If a wife is awarded a proportion of her husband's pension and wants to draw on it before he retires, she can transfer the value of her benefits into a separate approved pension arrangement in her own name. This gives her more flexibility about how and when she wants to use the benefit.

A pensions adjustment order can be made in respect of retirement benefits and/or any contingent benefits under the scheme. Contingent benefits are any benefits payable in the event that the scheme member dies while he 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 granting of the judicial separation or divorce.

Although the spouse can apply for a pensions adjustment order in respect of the retirement benefits at any time provided he or she has not remarried, the most cost-effective time to do it is during the divorce or judicial separation proceedings. "Leaving it until later would mean you're only going to get involved in another raft of legal fees," says Mr McCarthy.

The court may order that costs be paid equally by both parties, with the amount including both the initial cost of collating information on the pension benefits and the court costs. Family law solicitors dealing with the divorce may ask a consulting actuary, such as Mr McCarthy at the Pensions Settlement Bureau, to compile a report on the pension benefits accrued by each spouse, including benefits from previous employments and any additional voluntary contributions that were made.

These benefits form part of the settlement negotiations, although it may not actually reach the stage where one spouse applies for a court order. "Once the spouse realises how much the pension is worth, a deal may be done between themselves. The spouse might say, 'I'll take the house' but leave the pension alone. It's a balance sheet," explains Mr Kevin Finucane, legal director at insurance brokers and pensions consultants Coyle Hamilton.

"Each case has to be looked at individually, there is no hard and fast rule," notes Mr McCarthy. The court may decide that a woman who will receive a reduced level of pension benefit from occupational schemes because she took five or six years out of full-time employment to raise her children should also receive a share of her husband's assets.

More flexible personal pension schemes for people in temporary or part-time employment such as the new personal retirement savings accounts (PRSAs) won't necessarily reduce the number of applications for pensions adjustment orders, according to Ms Hutch at the Pensions Board.

"Homemakers can take out personal pensions in their own name, but the court will have to ask what kind of benefit that will provide," she says. "It could be that someone with some form of personal plan could get a smaller percentage of their husband or wife's occupational scheme than someone who has no pension at all."

Divorce and judicial separation have existed in Ireland only since the mid-1990s and it is still "early days" in terms of the practice of splitting pensions, according to Mr Finucane. "There's not a lot of history there yet," he says.

The family court is not bound to grant a pensions adjustment order, and may 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.

"Pension settlements have become part and parcel of separation and divorce proceedings. If you are in a pension scheme, don't overlook that aspect," concludes Mr McCarthy.

For more information, the Pensions Board has produced several booklets on this topic, including A Guide to the Pension Provisions of the Family Law Acts and Women & Pensions.

The Pensions Board can be contacted at 28/30 Verschoyle House, Lower Mount Street, Dublin 2. Tel: 01 613 1900. Fax: 01 631 8602.

E-mail: info@pensionsboard.ie