New regulations
A new EU Directive, 2016/2341, on the Institutions for Occupational Retirement Provision (IORP Directive) aims to harmonise and provide for more sustainable and adequate occupational pensions across the European Union. It was transposed in Ireland by way of the EU (Occupational Pension Schemes) Regulations 2021.
It creates vast changes to the pensions sector in Ireland, including increased compliance. These increased regulatory requirements have led to thousands of existing pension schemes transferring into new bodies, known as master trusts.
Effects for divorcees
In divorce proceedings, pensions are often the greatest asset owned by the parties, aside from the family home, and the Court can make pension adjustment orders so that one party obtains or retains a benefit in the other party’s pension. The Court can order that retirement benefits are shared between the parties. It can also order that contingent benefits are retained by the divorcees. Contingent benefits are death in service benefits. If the pension holder dies whilst still in employment, the spouse would receive a payment. A contingent benefit pension adjustment order must be obtained within twelve months of the parties getting divorced. If the divorce was obtained more than twelve months ago, a party cannot seek to have these types of orders varied or amended.
Transferring a pension to a master trust means that the court order is no longer effective as they do not relate to the new scheme.
The Law Society has stated that the issue is of such seriousness to warrant emergency legislation to deal with the matter. The Society has prepared draft legislation, seeking to remove the 12-month limitation period, and seeking that the trustees of the new, master trust, schemes would have to recognise the original orders. However, as matters stand, such orders will not be enforceable and it could lead to very significant financial loses for divorcees who obtained such contingent benefit orders in the past.
