KiwiSaver: Savings fund fair game in divorce

It was a year in which around 8500 people divorced. Photo / iStock

Q: Can a KiwiSaver scheme be split in half following a separation or does one have to settle a claim in cash?

A: Last year nearly 20,000 people tied the knot with a civil union or a more traditional marriage.

It was also a year in which around 8500 people divorced.

As part of the relationship break-up - marriage, civil union or de facto relationships - property may also be split: the Property (Relationships) Act sets out the rules. The assumption is each partner contributed equally to the relationship, leading in most cases to a 50/50 property split.

Property covered includes "tangible" items, such as houses, cars, furniture, jewellery and money, and "intangible" items, such as a share in a business partnership, fishing quota and a superannuation scheme.

Money in KiwiSaver schemes can be part of a settlement.

Lawyer and KiwiSaver specialist Emma Dale from Chapman Tripp says a court order will explain how a couple's assets are to be split.

"If the court order directs the trustee/manager of a KiwiSaver scheme to immediately pay out a portion of a person's KiwiSaver balance to the person's ex-spouse/partner then the court order will take effect."

Some or all of a person's KiwiSaver balance can be paid out as part of a property relationship asset split, but only if a court order specifies it. "An agreement is not enough," she says.

Joe Bishop, head of retail wealth and marketing at KiwiWealth, says providers are bound by what the court directs them to do.

"Some court orders may direct providers to split a member's KiwiSaver account in half and that half is directed into their partner's KiwiSaver account, into their partner's personal account or even into a solicitor's trust account."

Some court orders may direct just a portion of the funds be withdrawn.

"For example, if both partners have KiwiSaver accounts both amounts may be added together and divided by two.

"One partner may then be directed to withdraw a portion of their KiwiSaver account so the other partner has an equal share of the combined KiwiSaver accounts.

"Once we have been provided with the court order we require a statutory declaration from the member before we can withdraw the funds, stating if they have resided outside of New Zealand for any period of time for member tax credit purposes," says Bishop.

The Banking Ombudsman has heard a case where the KiwiSaver provider, a bank, had turned down a couple's request to transfer money from the wife's KiwiSaver to the ex-husband's.

The couple had entered into a relationship property settlement agreement in accordance with the Property (Relationships) Act.

Although court orders and contracts between spouses or partners are binding, they are not equivalent, says the Banking Ombudsman. "A contract represents a voluntary agreement between at least two parties; a court order is a proclamation by a judge determining the legal relationship between the parties."