Superannuation and relationship breakdown

How to carve up super when a relationship breaks down is becoming a big issue.

fight over super

As the amount of money in superannuation grows, how to carve it up when a relationship breaks down is becoming a big issue.

Splitting superannuation has two basic problems — valuing it (if it’s a defined benefits fund), and inability to access it (if it’s an accumulation fund) because of preservation.

Suppose the breadwinner is a member of a defined benefits fund, where the amount of end benefit depends on their final salary. If they have many years to work it is nearly impossible to put a value on such a benefit. Also, it is possible they will change jobs prior to retirement age and end up with a much lower superannuation payout.

If they are a member of an accumulation fund it is simple to value their superannuation as they will have an account balance that grows each year by earnings and contributions. However, such funds typically will not be able to be accessed by the party receiving the split of the super funds until retirement age.

Consider a very simplified situation where the husband is the breadwinner, the wife works two days per week, there are young children and the family home has a mortgage. Suppose the parties agreed (or failing agreement the Court decided) on a property settlement that saw all assets owned by them, including superannuation, split evenly between them.

Leaving aside the issues of spousal maintenance and child support, after the split the wife is likely to face the challenge of trying to buy a home with a small deposit and insufficient income for the size of the loan needed. Any money she had received into her superannuation fund from her husband’s superannuation fund, as part of the property settlement, would be useless, as it may be 30 years before she could withdraw it.

A better solution may be — again leaving aside the issues of spousal maintenance and child support — to let the breadwinner, in this case the husband, retain all (or a larger proportion of) his superannuation and a smaller share of the other assets.

This could allow them both to start again on a more equal footing.

The husband has the higher earning power, meaning he is more likely to have sufficient income to service a loan for a home and, therefore, a better chance to buy one with a small deposit. The wife has a larger amount for a deposit and there is potential for her to be able to service a smaller loan for a home.

Noel Whittaker is the author of Superannuation Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.

For your chance to win one of five copies of Superannuation Made Simple, email us at competitions@yourlifechoices.com.au with your name, phone number, address and ask Noel a money question. The best five questions will win a book and be published as articles.

Entries close Friday 15 September

RELATED ARTICLES





    COMMENTS

    To make a comment, please register or login
    *Imagine*
    1st Sep 2017
    11:33am
    Nice one Noel (tongue in cheek). Now the challenge is to answer the same question when the relationship is between two people of the same gender. Don't think I will wait around for you to sort that out.

    1st Sep 2017
    12:24pm
    I know a situation where person married a Chinese girl the marriage was almost doomed from the start because of her violence which only occurred about 12 months after they were married they split after 4 years. She got half of his super and all his other belongings when she contributed absolutely nothing in such a short time . Lucky we owned the house or she would have probable got that but she did get half of the increase of the value of the house from when it was purchased and what it was worth at the time of the split. She also got legal aid. The family law certainly needs to be changed when situations like this occur. She did produce 2 beautiful girls
    Anonymous
    1st Sep 2017
    2:37pm
    What has her race got to do with your story
    KB
    1st Sep 2017
    2:17pm
    Better for couples to draw up a financial agreement witnessed by lawyer. if a couple split then you take out what you have earnt. Super should be kept separate.
    Anonymous
    1st Sep 2017
    2:38pm
    Actually better to enter into a pre-nup
    Give her nothing
    Kathleen
    1st Sep 2017
    2:41pm
    It should belong to the paypacket it is connected to. It should also depend on contribution to the marriage or partnership. Some are very onesided as far as money and work is concerned. Women seem to be the winners too often when they are not equal contributors. Length of time together is another one. Another area that seems to be weighted against the man is child support.
    Anonymous
    1st Sep 2017
    2:50pm
    Yes Grandma you are dead right. I wonder how it goes when a couple of Lesbians are together and split apart from the cat fight the financial situation could be interesting?
    buby
    7th Sep 2017
    8:02pm
    Oh dear i personally was a very equal contributor, and my husband withheld much of his money. I worked exactly same hours as he, and sometimes more, as well as cleaned house and cooked when i got home from work. He contributed very little. but he always had money for his hobbies, and grand ideas.
    He even borrowed money from me which he never repaid. So NOt everybody has the work 2 days and stays at home to look after the kids situation, and still lose out. I never got any super from him, but i was lucky he didn't carry on about splitting cost when all was said and done. but i did lose many wasted years with somebody that not cared a hoot about me. It was a shame he had NO brain, nor cared more in our marriage. I gave one Hundred percent. He played a game of his own. NO wonder women Change badly after marriage!! and become poorer. Some of us in a NO win situation.
    buby
    7th Sep 2017
    8:04pm
    I don't even know if my husband had Super, or i would have like to have claimed half of it, as he kept me in the dark and fed me B>S.
    Whats 20yrs Worth. Can I still do it???
    GoldenOldie
    1st Sep 2017
    5:33pm
    When my marriage broke up I asked for and got a fair share of my ex's super. He had his own business and contributed to a private superfund. I worked fulltime for 20 of our 24 year marriage but was told by my employer that I was not eligible to join their (govt) super fund until I forced the issue in the 1980s. Consequently my super balance did not compare to my husbands. We added our total balance, divided by 2 and he paid me the shortfall. Quite fair considering my job supported us until his business became profitable and that I kept the business books until we split. So much for women not contributing their fair share!! He's lucky I didn't ask for my share of the business too.
    Anonymous
    2nd Sep 2017
    3:07am
    50% is fair
    What is your point ?