COMMENT:

Q: I have recently separated from my wife. I have accumulated a significant superannuation over the last 35 years of working. I've been told that I need to pay her half of my superannuation. I started working and saving five years before I met her. I don't have a lot of cash available, especially after the division of our other assets. I'm still a fair way off being at retirement age and able to access the fund. Is there any way I can access it early to pay out her share?

You are correct to say your wife is entitled to a share of your superannuation. Any superannuation that you had acquired before the relationship began will remain yours. However, any increase during the relationship will be relationship property and therefore must be divided equally between you.

If your superannuation is greater than your wife's, you will need to make an adjustment payment. Most superannuation schemes lock the funds away until you reach a qualifying age (this is currently 65). This can make it difficult to pay the adjustment if you do not have other assets to draw upon.

Options

If your relationship property pool is large enough, you may be able to forgo other relationship property to account for the adjustment. This is often the best option if you have sufficient equity in a family home.

Sometimes your share of relationship property may not be large enough to cover the adjustment payment. In this case, you may choose to take out a loan to cover the payment. This raises its own issues if you are wanting to purchase a new home or do not qualify for lending.

Relief may be available under section 31 of the Property (Relationships) Act. Under the Act the Court can make an order to release funds from the superannuation scheme to cover the payment. The Court can make this order if you are unable to make an immediate payment, or it would be unjust to order you to do so.

The value of your superannuation will be assessed at the date of your separation. During the Covid-19 outbreak, many superannuation funds have decreased. If you separated a few months ago, this may mean that your superannuation is now worth less than at separation. The Court will likely take this into account when assessing your ability to make an immediate payment.

Before an order is made, you will have to provide written details outlining the arrangement by which your wife will receive her share. Once an order has been made, it will be served on the manager of your scheme who will be obligated to release the funds.

Provisions in your scheme

To access Kiwisaver funds, you need an order of the Court. However, some superannuation schemes may allow you to access to your fund without a court order. For example, the Police Super Scheme allows you access to your savings to pay the other party as part of the relationship property settlement. This settlement agreement must meet the requirements of a property agreement under the Property (Relationships) Act. It is likely you will have to provide the scheme manager with a copy of this agreement.

Conclusion

You are able to pay out your wife's share of your superannuation from the fund itself, but only in certain cases. This can only be done if you are unable to pay the adjustment through other methods. A Court order is required to access the fund. Alternatively, your scheme may allow you to withdraw funds for this purpose if you can provide a signed relationship property agreement.

This article first appeared in the NZ Herald on the 20th of June 2020.