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Breaking up with your Kiwisaver

One of the more common questions we receive from separated couples is whether they must ‘split’ their Kiwisaver accounts.  The short answer is, yes. 

Income acquired during a relationship is relationship property, meaning it is (usually) shared equally.  As Kiwisaver accounts are funded from income, they will also contain relationship property.  The question is then, “how much”. 

The law relating to Superannuation Funds confirms that it is only the proportion of the account “attributable to the relationship” which is relationship property.  What this means is the value of a fund from before the start of the relationship will usually be your separate property. 

Of course, this is easy to say, but hard to do.  Kiwisaver accounts are not simple bank accounts that can be divided into two shares.  The usual rule is that the person has to keep their account and it is not divided. 

The more common resolution is for one party to take the benefit of the Kiwisaver fund in full, with an offset payment, or adjustment, being made to the other spouse/partner to compensate them. 

As an example, if a husband and wife have $100,000.00 in a bank account and the wife has $50,000.00 in her Kiwisaver account from during the relationship, but the husband has no Kiwisaver account, the total property to be divided between the parties is $150,000.00 in value.  

As the wife will probably have to keep her Kiwisaver fund intact, she would receive $50,000.00 from the Kiwisaver account, but only $25,000.00 in cash from the bank account.  The husband would receive $75,000.00 in cash and nothing from the Kiwisaver account.  

While this may appear harsh, the law would say that both parties have received an asset of similar value - $75,000.00 of property. 

But, as with anything in a breakup, it can get messy.  What happens, for example, if one party receives the value of their Kiwisaver fund, but the market then crashes and the Kiwisaver fund is reduced dramatically in value?  In our example above, the value of the wife’s $50,000.00 Kiwisaver account might be slashed in half, meaning the husband ends up with $75,000.00 and the wife $50,000.00 in total. 

In a case like this it may be necessary to revisit the earlier agreement.  This is allowed in certain circumstances, although it is not common.

Dividing assets during a breakup is complicated.  Dividing Kiwisaver funds can be even more complicated.  You should always consult with your lawyer to see what your rights are and what is the best method to divide any joint property assets.

  • Posted By: Graham Day on Mon, 7th Oct 2019 @ 11:46:07

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