Ask Susan: What happens to KiwiSaver in a break-up?

Thursday, 27 July 2017

Your retirement savings can be cut in half when you divorce.

I am in the process of separating from my partner and have been told that he may be able to lay a claim to half my KiwiSaver balance, because I was contributing to the scheme while we were together. Is this true?

Yes. Lawyer Selina-Jane Trigg, who specialises in family law, says KiwiSaver funds are relationship property, and up for division in a split, when they are acquired during your de factor relationship or marriage.

'This is the case irrespective of whether the funds came from individual, government or employer contributions,' she says.

'The portion of your KiwiSaver that was acquired before your de facto relationship or marriage started will be ring-fenced and treated as your separate property. This means that only the portion of your KiwiSaver that is arises from contributions during the relationship/marriage will be divided equally between you and your spouse as relationship property.'

* Ten years on, 10 KiwiSaver questions remain

Accessing the money is tricky, though, because it is usually locked in until someone turns 65.

'Where a couple have other relationship property, often the spouse who holds the KiwiSaver retains this and then, out of their share of the rest of the relationship property, compensates their former spouse for their share of the KiwiSaver,' Trigg said.

'For example, if Tane and Maria separate and sell their family home, Tane may take a lesser share of the sale proceeds for the home but keep his KiwiSaver while Maria takes a higher share of the sale proceeds to compensate her for her interest in Tane's KiwiSaver.'

If that is not possible, a court order can be sought to direct that the KiwiSaver scheme pay out a portion of the balance to the former spouse.

Trigg said sometimes that order would require the payment go into the other person's KiwiSaver fund.

'Kiwisaver providers are bound to do what the court order requires them to do. An agreement between the former couple is not enough – only a court order can compel the fund manager or trustee to make the payment. If there is agreement between the spouses, the court can be invited to make an order by consent which is a lot more cost effective and efficient than a disputed application.'