The need for a grant of probate to access approved retirement funds can cause significant financial hardship on the death of a spouse.
Mark O’Sullivan,
managing director of Provest Pension Consultants
Business Post
3rd February 2025
There is a lot to consider when managing the financial aspects of the death of a spouse. Not only is someone grieving, but they are also trying to navigate and come to terms with money matters.
A spouse or partner who is settling the financial affairs of someone after their death could face significant delays in the transfer of their pension. We conducted a survey recently at Provest and found that a grant of probate is required to access the vast majority of approved retirement funds (ARF) following someone’s death.
Mark O’Sullivan,
Managing Director,
Provest Pension Consultants
Most people at retirement will take a portion of their retirement savings account in the form of a lump sum and the balance is used to purchase an ARF, annuity or a taxable cash sum subject to certain conditions. An ARF is a personal retirement investment fund where a person keeps their money invested after retirement, meaning they can take a flexible income.
Legally a retiree can only hold an ARF in their own name, so on death the fund becomes part of their estate. While the ARF can be passed on through the estate to their surviving spouse, in most cases this requires a grant of probate to access the funds. This can be a long and expensive process and, in the meantime, the person has no access to a retirement income from the ARF.
We strongly believe that ARF legislation should be amended to allow the funds to be held in the joint names of a married couple or civil partners as joint tenants. This means that on the death of one, the surviving spouse will automatically inherit the ARF without the need to take out probate.
An increasing number of retirees in the private sector draw their pension from an ARF; the value of these funds is currently estimated to be in excess of €20 billion. The delay in accessing these funds can cause considerable financial hardship for a person who is already dealing with the grief of losing a partner.
We contacted 11 ARF providers and found significant variability in legal requirements and thresholds. Some providers require grant of probate and an instruction from a solicitor irrespective of the value of the fund, while others release ARF monies without probate if the fund does not exceed its threshold amounts. These amounts can vary from €25,000 to €60,000 to €100,000.
Others apply their thresholds to the entire estate, not just the value of the ARF fund.
We need to start treating ARFs in the same manner as the family home or joint bank accounts, with ownership of the fund passing immediately on death to the surviving spouse.
I would urge the new government to prioritise legislation to facilitate this. In the meantime, I encourage ARF holders to consult their providers to see what terms and thresholds will be applied in the event that they predecease their spouse so that any unnecessary anguish can be avoided at what will be an already difficult time.
At any stage throughout your retirement, you can use your ARF to purchase an annuity. Annuities pay retirees a guaranteed income in retirement and are part of a broader category of assets called “non-probate” assets that avoid probate.
If an annuity has a spouse's pension as part of its terms and conditions, this can commence immediately on the death of the main annuitant.
Annuities have fallen out of favour since the inception of ARFs but nonetheless one may consider them as an appropriate option for a modest portion of their pension pot, as they will provide a guaranteed income for life and as noted above they avoid the probate problem associated with ARFs.
Long-term interest rates and mortality rates have a significant impact on annuity rate pricing. For example, last May a 65-year-old retiring with a pension pot of €200,000 could secure an income of €8,364 per annum. This annuity remains level for life and has a 50 per cent spouse's pension in the event the main annuitant dies.
Today, a 65-year-old retiring with the same pot would receive an annual income of €9,732. This is a significant difference over a short period of time and demonstrates the impact long-term interest rates have on annuities.
An annuity can be purchased from an insurance company in exchange for an accumulated pension fund asset throughout retirement. A wide choice of annuities are available to suit individual circumstances such as single life or joint life, guaranteed period (up to ten years), with or without overlap, level or escalating payments and enhanced annuities taking into account the health of the individual.
Choosing between an annuity and an ARF at retirement is one of the most critical decisions pension plan members face. The vast majority of retirees opt for the ARF option; however, do not neglect considering a combination of an annuity and an ARF, which may represent an optimum outcome.
Annuities and ARFs have distinct differences and may suit different people depending on a number of factors, including their attitude to risk, their state of health at retirement, the personal income requirements at retirement, and whether investment growth or security is more important during retirement.
There is no easy answer or one-size-fits-all solution, so it is imperative that retirees understand all of their options by engaging with their financial adviser for impartial advice.
Mark O’Sullivan is managing director of Provest Pension Consultants.