Divorce is not always an easy subject to talk about, but it is one that can cause some of the most difficulty for people, both emotionally and financially. It is among life’s most challenging transitions, and it is understandable that so much attention goes to the family home, savings and day-to-day finances. What often gets far less attention, though, is one of the most valuable assets a couple may hold, retirement savings. Many people spend decades building up retirement benefits, only to have them overlooked or misunderstood when it comes time to negotiate a settlement.

As financial advisers, we see this often. Clients are frequently surprised to learn that retirement benefits can form part of a divorce settlement and that the value involved can be significant, sometimes representing one of the largest components of a family’s overall wealth. Get this wrong and the impact on long-term financial security can last for years, for both parties.

While your solicitor will guide you through the legal side of a divorce or separation, understanding how retirement benefits are treated can help you make better-informed financial decisions at what is often an emotive time.
Why Retirement Benefits Matter

Retirement benefits differ from a current account or a savings account in one important way, they’re designed to provide income much later in life, and that makes them easy to underestimate. Because the money is not immediately accessible, it can slip down the list of priorities when a separating couple is working out where they stand financially.
Yet a retirement arrangement built up over twenty or thirty years can be worth hundreds of thousands of euros. Ignore or undervalue it and the result can be an unfair settlement, one that leaves a party with significantly reduced income for the rest of their life. That’s why retirement planning deserves a proper place in any financial discussion during divorce or judicial separation.

Understanding Pension Adjustment Orders

One misconception we come across often is the idea that a private agreement between spouses is enough to divide retirement benefits. It is not. In Ireland, retirement arrangements are governed by specific legislation, and trustees must act in line with the law and the rules of the arrangement in question, so in most cases a Pension Adjustment Order (PAO) is required. A PAO is a court order directing trustees on how retirement benefits are to be divided between the parties, and without it, trustees cannot simply act on a private agreement.

It’s worth knowing too that a separate PAO is required for each retirement arrangement being divided. Someone with a workplace pension scheme, a Personal Retirement Savings Account (PRSA) and a Personal Retirement Bond (PRB) will usually need a separate order for each one. It is one of the reasons early planning and professional advice make such a difference.

A Common Concern – “Will I Have to Wait for My Former Spouse to Retire?”

This is probably the question we hear most often, if I am awarded a share of my former spouse’s retirement benefits, do I have to wait until they retire before I can access them?

Most people assume the answer is yes, and often it is, but not always. Where the member spouse has not yet started drawing their own retirement benefits, there may be an option to transfer the awarded share into a retirement arrangement in the beneficiary’s own name. That changes things considerably. It means future retirement decisions no longer have to depend on what a former spouse chooses to do, and for many people, taking that step is an important part of building financial independence after a divorce.

The Value of Financial Advice

A divorce settlement brings together legal and financial considerations that need to work in tandem. Your solicitor will advise on the legal framework and the documentation required, while a financial adviser can help identify what retirement arrangements exist, establish what they are worth and talk through how each option might play out over the long term.

Questions worth asking at this stage include:

• What retirement arrangements exist?
• What are they worth?
• Are all retirement assets being considered?
• What options may be available following a Pension Adjustment Order?
• How could retirement income be affected in future?
• Are there tax implications that should be understood?
• Could a Pension Adjustment Order have implications for either party’s Standard Fund Threshold position, and how will any retirement benefits be tested against the Standard Fund Threshold when benefits are ultimately drawn?
• Has the impact of any retirement benefit split on future pension funding opportunities and retirement planning been considered?

Working through these early can save a good deal of uncertainty and help you avoid complications further down the line.

Looking Beyond the Settlement

A divorce marks the end of a legal relationship, but it is also the start of a new financial chapter. For many people that means revisiting retirement goals, reassessing investment strategy and working towards long-term financial independence on their own terms. A well-considered retirement strategy, built with this in mind, can go a long way towards providing security and peace of mind for whatever comes next, whether you are the member spouse or the one entitled to a share of the benefits.

Final Thoughts

If there’s one mistake we see time and again, it’s retirement benefits not getting the attention they deserve during divorce proceedings. Immediate financial needs and the family home will naturally draw the most focus, but retirement assets often make up a substantial part of a family’s overall wealth and deserve to be treated that way. The earlier they are identified, reviewed and discussed, the better placed both parties will be to move forward with clarity about their long-term financial future.

If you are navigating a divorce or judicial separation, appropriate legal and financial advice can help ensure retirement benefits are properly understood and considered as part of the overall settlement.

Further Information

The Pensions Authority has published a useful guide, A Brief Guide to the Pension Provisions of the Family Law Acts, which sets out how Pension Adjustment Orders work and how retirement benefits may be treated following divorce or judicial separation. Read the Pensions Authority Guide

How We Can Help

If you are going through a divorce or judicial separation and would like to talk through how it might affect your retirement plans, our financial advisers at Cantor Fitzgerald Ireland are happy to help. Get in touch with our Wealth Management team to discuss your options.

Written by Laura Reidy, Director of Wealth Management