Breakups are hard and divorce in particular is not an easy thing to go through, what with the couple’s belongings having to be divided fairly between the two on top of the emotional trauma. Although we do not wish that upon anybody, according to Statistics NZ over 82,000 couples a year divorce and many more in de facto relationships split up.
So we are going to make as much information available to you in terms of what happens to your KiwiSaver in such a situation so you have the knowledge you need if the time comes that you will. This way hopefully you will have peace of mind to focus on other things that need your attention. So, there are some questions that you might have that we can answer for you such as; Is my KiwiSaver relationship property? What exactly is relationship property? If it has to be split between the two of us, how does that happen?
Let’s start with clearly explaining what is considered relationship property in terms of KiwiSaver. Any contributions made to your KiwiSaver during the course of your relationship and any earning that came from those contributions are seen by the law as relationship property. So, again, by law, any contributions as such have to be split evenly between the two parties divorcing.
You might say that one of you contributed more to your KiwiSaver than the other person. Unfortunately, if this happened during the course of your relationship, in the eyes of the law any contributions that were made by you, the government and your employer during this time is to be divided equally. Even if only one of you has a KiwiSaver account, that gets “pooled” together with the rest of the assets accumulated during the course of the relationship that need to be halved. Most of the time, the date of separation is used as the end value of your joint KiwiSaver. However, if the settlement date is too far into the future, for whatever reason, the final relationship property settlement date is used instead so as to keep it fair between the parties.
One option is that the court will order the KiwiSaver provider to release some of the money from the account with the most funds and allocate that money to the other party. This is necessary if the couple cannot come to an agreement over how to divide the assets in a way that everyone is satisfied. This however can be a costly and time consuming process.
What often happens though is that the couple may decide to keep their own KiwiSaver accounts intact and settle in other ways. For example, if one person has a larger account than the other, they may settle the difference by letting the other person keep the car or the antique table they bought together or anything else that is worth the same amount of money as the KiwiSaver settlement money they are due. It is important to bear in mind that any agreement is only valid if both parties have received independent legal advice and have signed the agreement in front of witnesses. Otherwise, the agreement is not legally binding and you risk the ex-partner laying claim to your KiwiSaver assets at a later date.
However, there is some good news too. Any contributions made to your KiwiSaver by yourself, the employer and the government prior to the relationship starting, and all earnings from those contributions are put aside and remain your sole property.
So while divorce is a painful process, it is important to continue to take care of your finances and KiwiSaver is a big part of that as it’s what will look after you when you retire. Start taking care of your earnings now and take the National Capital Kiwisaver HealthCheck. Make that money work for your retirement, starting today.