Gordon Gekko
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are you talking about a pension adjustment order?can they hive-off some or all of the AVC PRSA to square-off
A subset of that, yesare you talking about a pension adjustment order?
I assume it’s just another type of pension adjustment order then.A subset of that, yes
The query is more along the following lines:
I’m a public servant. Using the 50% when we were married, my spouse might get €2k a year. Can I just lob €50k into an AVC PRSA and offer them that to make a clean break?
1. To avoid a scenario whereby a spouse comes back for a second bite of the cherry. It demonstrates that the parties and the court have taken the pension asset into account already. Also, trustees tend to like the existence of PAOs when it comes to payout time. Eases their concerns that they might pay a benefit to the "wrong" party.Two questions on PAOs
1. Why are nil (in reality absurdly nominal) PAOs put in place?
2. In a DB scheme - say the divorcing couple is made up of a 50 year old male and a 40 year old female - if benefits are given from the male (under a PAO) to the female, at what age are the benefits allocated to the female payable?
There are no trustees. It’s served on the relevant local or central government body.1. The original question was to do with a public sector pension. PAOs are served on the trustees. Who are the Trustees of public sector schemes? How does this work?
I don’t think so. The wife simply receives the husband’s entitlement (or portion thereof) while he’s alive.2. In the example I gave, there was a 10 year age differential between the spouses so that the wife's portion becomes payable when she is 55. If we consider a privately funded DB plan, this must give rise to a higher liability for the scheme. It seems strange that the actions of a member (his divorce) causes an increased expense to the employer in
Does it really though? If the individuals remain married, a liability is also created on death in terms of a pension for the surviving spouse. Probably a bigger one.Thanks Right Winger,
So, a few follow ups......not necessarily just for you.....
2. In the example I gave, there was a 10 year age differential between the spouses so that the wife's portion becomes payable when she is 55. If we consider a privately funded DB plan, this must give rise to a higher liability for the scheme. It seems strange that the actions of a member (his divorce) causes an increased expense to the employer in a DB plan when no increase would occur in a DC plan?
Does it really though?
Versus that person being divorced and a total of €50k, split €45k and €5k, being paid to both former spouses individually for the duration of their lives.
Is that how a PAO works with a DB scheme?Versus that person being divorced and a total of €50k, split €45k and €5k, being paid to both former spouses individually for the duration of their lives.
I have no idea what point you’re trying to make.Firstly, I'm just trying to understand how it works.
Secondly, in cases where the pension plans liability is reduced, my point is equally valid - just the other way - in that the question becomes why should the employer benefit from the divorce in a DB scenario?
Thirdly, I don't agree with your hypothesis. You are just picking figures that may or may not support your point. I could explore further if required. The essential point is that I could easily pick a scenario where the liability is unambiguously greater when the pension is earmarked for the non-member spouse. Say, the member had left service so no future service and all the deferred pension is allocated to the younger spouse - there is no way that the immediate annuity cost of an inflation-linked single life pension payable to a 55 year old is less than the NPV of a 50% reversionary pension payable to a 65 year old. Do you accept?
The principle being that the ‘Trustees’ should prefer a divorce scenario.
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