Most people treat KiwiSaver as money they can’t touch until they’re 65. Usually, that’s right. But separation is one of the few exceptions. The Property (Relationships) Act 1976 (Act) allows the court to order KiwiSaver and other superannuation funds to be released to settle a property division.
Is KiwiSaver relationship property?
Mostly, yes. The part of a KiwiSaver or superannuation balance built up during the relationship is relationship property. That includes your own contributions, your employer’s, the government’s, and the growth on all of it. What you had saved before the relationship started is usually your separate property. Whose name is on the account makes no difference.
Ordinarily, KiwiSaver is shared by value, not by splitting the account. Both balances go into the relationship property pool alongside the house, savings, cars and debts. Whoever ends up with more pays the other the difference, normally out of proceeds or other savings.
The problem
That works when there is something to pay the difference with. It works far less well when KiwiSaver is one of the biggest assets a couple has. A partner can be comfortable on paper and still have no way to fund the payment. The usual result is that the house gets sold, or someone borrows, to cover a debt the KiwiSaver could have paid.
The fix
Section 31 of the Act gives the court power to make orders about superannuation entitlements, including KiwiSaver. KiwiSaver scheme rules require providers to release funds where a court order under another statute requires it. Those rules name section 31 specifically.
In practice, the partner with the larger balance may be able to pay some or all of what they owe straight out of their KiwiSaver, rather than finding the cash somewhere else.
Smith v Moore shows how it works. The parties had signed a separation agreement. The Family Court then ordered the trustees of Mr Moore’s KiwiSaver scheme to pay $309,000 into his lawyers’ trust account to give effect to the agreement. The Court noted that Parliament had “clearly given the Court the jurisdiction under section 31 to override withdrawal restrictions”. This money was then utilised to assist with the settlement payment owing to Ms Smith.
This is most useful where KiwiSaver makes up a large share of the total relationship property pool, where there isn’t enough elsewhere to fund the adjustment payment, or where one partner wants to keep the house and needs another way to even things up.
How it works in practice
At a high level, the court makes the order, and the KiwiSaver provider carries it out. How the money moves depends on the wording of the order and on the provider’s own requirements. So, the order needs to be drafted carefully, and ideally checked with the provider before it is made.
Where both parties agree, the order can be sought by consent alongside the separation agreement.
Key points
- Get the statements. You need KiwiSaver and superannuation balances for both partners, at the start of the relationship and at separation.
- Ask before you sell. Before agreeing to sell the house or take on new borrowing, check whether KiwiSaver could assist.
- Put it in writing. A separation agreement only binds you if it is in writing, signed by both of you, and each of you has had independent legal advice, certified by your lawyer. If KiwiSaver funds are to be released, you will also need a section 31 order.
- Sort out the order before settlement, not after. The terms of the order and the provider’s requirements should be worked through before the deal is finalised.
KiwiSaver is locked until retirement. Separation is one of the few things that can pick the lock.
Superannuation and KiwiSaver are all part of your separation, and getting independent legal advice is critical to finalising your agreement. Contact our divorce, separation and relationship property specialists Melissa Simpson or Gabrielle Thompson to know where you stand.
