Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 183:

In page 142, between lines 19 and 20, to insert the following:“Standard Fund Threshold in the case of a separation or a divorce

60.The Minister shall within three months of the passing of this Act, prepare and lay before the Oireachtas a report on how the Standard Fund Threshold on Tax Relieved Pension Funds is calculated in the case of a divorce or separation whereby a Pension Adjustment Order is made to divide the pension fund between the two ex-spouses.”.

The standard fund threshold stands at €2 million. I refer to its relationship with a pension adjustment order which is common in legal separations and divorces.

As the Minister is aware, as part of many divorce settlements which become court orders, a pension adjustment order is made which transfers the pension benefits from one of the ex-spouses to the other. However, the party who originally earned the pension is obliged to include that pension amount for the purposes of calculating their standard fund threshold even though they would no longer be the beneficiary of that pension and the person who is benefiting from the pension adjustment order does not have the value of that pension count towards their standard fund threshold. It only counts once but it is fully counted in respect of the person who, for example, paid into that pension and accumulated that pension pot and as a result of the breakdown of the relationship, the settlement that has been agreed and this pension adjustment order being made, their standard fund threshold is effectively reduced.

It is a quirky one but it can have serious implications for those caught up in it. I went through one particular example in detail and I could see that the consequences of it were pretty significant.