Pension Adjustment Orders - Nelson Life Pension Advice
Until the mid-1990s there was no way to split pensions on a marital breakdown.
Separation agreements which tried to agree a simple split of the benefits were not, and are still not, enforceable against pension scheme trustees.
The Family Law Act, 1995 and the Family Law (Divorce) Act, 1996 were introduced and enabled the Courts to share out pension rights between separating or divorcing couples. The pension rights still cannot be shared out without a court order.
The laws contain a complicated system for dividing up the benefits and it is not always possible to match how the couple wants to share out the benefits with what the law requires.
Broadly, there are two approaches which may be taken by the Court in recognising the value of pension benefits. These are:
1. the Court may serve an order (known as a ‘pension adjustment order’) on the trustees of the pension scheme of which either spouse is a member, requiring the trustees of that scheme to pay a proportion of the pension benefits to the other spouse or for the benefit of a dependent member of the family.
2. the Court may take account of pension benefits by means of any other type of order under the Act (e.g. by making an adjustment to the allocation of non-pension matrimonial assets i.e. property, savings, shares etc.).
Pension adjustment orders may be made in respect of benefits in the following pension arrangements;
Company pension schemes
PAO on retirement benefits
PAO on contingent benefits
Additional Voluntary Contributions (AVCs)
Personal Retirement Savings Accounts (PRSAs)
Retirement Annuity Contracts (RACs)
Trust RACs n Buyout bonds
It is very important to note that separate PAOs must be made for retirement benefits and contingent benefits in a company pension scheme.
Separate PAOs are also required for each separate private pension arrangement that exists (for example if you or your spouse contributes to a separate AVC arrangement).
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