Relationship breakdowns later in life can have a big impact on planning for retirement. Photo / 123RF
Couples over 50 years old who split up are more than twice as likely to feel financially uncomfortable than prior to separation, according to new research from the Retirement Commission.
Those who felt financially uncomfortable following a relationship break up jumped to 64 per cent, up from 21 per cent, as a division of assets later in life can have a financial impact on retirement.
Dr Jo Gamble, Retirement Commission research lead, said the research highlights the financial difficulties many New Zealanders face at retirement following a life shock like separation in later life.
“For New Zealanders who separate over 50, thinking about how assets are divided and the implication this will have on their retirement savings is incredibly important,” she said.
“Unfortunately, people don’t seem to access the support they need to protect their retirement plans from the negative impact of dividing up assets.”
The research revealed that 90 per cent did not consider retirement when dividing financial assets at all, yet 66 per cent of Kiwis reported having their retirement plans negatively affected by separation.
Sixty-three per cent said asset division later in life had a negative impact on retirement, while 20 per cent said it made no difference.
Women were more likely to end up financially worse off post-separation, with 69 per cent saying they felt financially uncomfortable after a split compared to men (54 per cent).
“We can attribute this to reduced earning potential for women who typically stepped back from their career while they took on the role of primary caregiver,” the report said.
The research was conducted by TRA, on behalf of the Retirement Commission, and included a survey of 155 people, 12 in-depth interviews with people who had separated in the past five years, and expert interviews with five specialists working in this area.
Another key finding in the research was how couples treated their KiwiSaver balances as part of relationship property.
Gamble said few people included KiwiSaver in the relationship property asset pool, despite contributions made during the relationship being relationship property.
In fact, three in four people did not take KiwiSaver into account when dividing their assets, according to the research.
“The feedback suggests that KiwiSaver is often viewed separately to the joint assets, with couples believing it to be money they have earned as individuals and out of scope of the wider division of assets,” Gamble said.
“Only 25 per cent of people included KiwiSaver when dividing their assets but 65 per cent took bank savings and other investments (including property investments) into account.”
It’s a point that barrister and family lawyer Jeremy Sutton emphasised previously when it comes to wills, separations and death.
“I see in my divorce practice people with very large KiwiSaver accounts ... and they don’t actually know it because most people aren’t looking every week at their KiwiSaver account seeing how it’s accumulating,” Sutton said.
When it comes to dividing KiwiSaver, 39 per cent of respondents said they kept their own KiwiSaver accounts, while 24 per cent said they traded off other relationship property so that their KiwiSaver balance(s) could remain intact.
Twelve per cent of people said they took the total value of their KiwiSaver and divided it equally between them.
More than half (57 per cent) of respondents determine the value of their relationship property rather than getting formal advice (30 per cent) - a decision that could leave some vulnerable to emotionally driven decision-making, the report said.
“The cost of seeking advice is likely the main reason why people would determine the value of their assets on their own. However, participants also seemed to equate coming to an informal agreement with being more reasonable or amicable,” the report said.
One in three perceive the outcome of their asset division to be unfair, but the report didn’t find any clear link between determining the value of assets without professional advice affecting overall fairness perceptions.
The Retirement Commission produced the report to help people over 50 make equitable and fair decisions about asset division when going through relationship separation.
Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.