Divorce is always a tiresome process. This is also true for pension funds, who face the implementation of a highly complex rule. Despite the fact that the new divorce law has been in force since 1 January 2017, it is worth revisiting once more to examine the new requirements.

The principle of an equal split of the vested benefits acquired during the marriage remains unchanged. Of course, the divorce court can always diverge from this principle. Persons in a civil union are now treated the same as married couples.

• The decisive date for the split is the initiation of divorce proceedings (previously: the end of the divorce proceedings)
• The split of ongoing old-age or disability annuities of the spouse under obligation (up to now: no division once an insurance event has arisen)
• Lifelong annuity payments for the entitled spouse, paid directly (up to now: spouse under obligation had to forward a part of his/her annuity; upon the death of the spouse under obligation, the basic annuity was converted to a survivor’s annuity, which could mean a considerable reduction in the annuity, depending on the pension fund)
• Persons not insured in a pension scheme who are not yet retired: the funds will flow into a sheltering fund under OPA that will pay the benefits upon retirement
• Periodic reporting of all pension assets to a Central 2nd Pillar Office so that the divorce courts can check the completeness of the reported pension assets (up to now, this office only reported “forgotten” assets)
• Clear rules and thus new requirements regarding shadow accounting under OPA (up to now: hardly any rules)

KPMG’s Competence Center Pension Funds has developed a questionnaire with which you can control whether the most important requirements arising from the new divorce law have been implemented.

As auditor of pension funds, our first experience under the new divorce law shows that annuities for divorcés/divorcées are rare – just as expected. At the same time, the implementation is highly complex and runs a significant error risk. We also found that lawyers and divorce courts are not quite up to speed on certain aspects regarding the new divorce law. It is therefore in the interest of the pension fund to closely monitor this aspect.

A serious challenge also arises from the presentation of the new divorce law in annual financial statements under FER 26. There are no explicit solutions in FER 26 for this situation. KPMG’s Competence Center Pension Funds has therefore worked out a recommendation on how the new transaction types may be presented in financial statements under FER 26.

The new divorce law, in force since 1 January 2017, meant that regulations, processes, controls as well as technical systems and financial accounting had to be adjusted or may still have to be adjusted in individual cases. Moreover, pension funds should also think about how they can present the already existing new types of transactions in the annual financial statements appropriately and in a manner adequate for the balance-sheet reader.

New Divorce Law Questionnaire (PDF, in German)