What happens to that superannuation fund when you divorce

Retirement savings which are pooled into a nationwide fund and guaranteed by the government is called superannuation. It is built up from contributions from the employee and the employer. Since the contribution made by the employer is a fixed percentage of your income before taxes, any increase in your salary rate will also mean an increase in the contribution of your employer.

By the time you are middle-aged, your superannuation fund will be quite a nest egg. There is only one catch. You cannot withdraw the fund, and you cannot use it until you reach retirement age.

What happens to that superannuation fund when you divorce or separate from your spouse or partner?

It remains yours as it is part of the benefits you derive from your employment. However, if you think about it, all the money you make from employment goes into the common funds of the marriage or partnership.

Since the funds which go into your superannuation partly come from your salary, then, it would be an asset sourced from funds that belong to the marriage or partnership. When you divorce or separate from your partner, it is an asset of the marriage that must still be settled and split between you and your spouse or partner.

One problem is that even if the superannuation is an asset, it cannot be considered as property that the parties can split or the courts can divide. It becomes a vested right only upon the employee’s reaching retirement age or if he is disabled or dies before retirement age. So how do you go about splitting your superannuation?

Well, some spouses/partners don’t even think of including the super when they list down the assets of their marriage or partnership. If both spouses have superannuation funds, they can keep their accounts to themselves.

That would be the fair thing to do unless one spouse has a large income and the other spouse only makes minimum wage. If only one of the spouses has income from paid employment, then letting one spouse keep his superannuation funds all to himself would not be just and equitable to the spouse who remained unemployed for the duration of the marriage or relationship.

Some courts estimate the value of the superannuation of the spouse with paid employment as of the time of the divorce and awards other assets to the spouse without paid employment to offset the value of the superannuation. This will be a good way to split the super if there are other assets of equal or superior value to the super. If there are no other assets, then it would not be just and equitable.

Other courts simply issue an order adjourning the settlement and division of the super until the super is due and payable. This is unsatisfactory as it may take years before the superannuation is payable. In the meantime, the spouse without paid employment has nothing to live on after the divorce or separation.

Reforms have allowed the splitting of the value of the superannuation 50:50. The value of the super that is considered corresponds to the length of the cohabitation. The value of the super that will be considered as an asset is the value of the time that the spouses/partners were living together. That value will then be split equally, and the other spouse’s share will be transferred to a separate account.

For instance, when a wife stays at home, at the time of her divorce from her husband who has a super, the value of the super at the time of the divorce will be split in half between them and the wife’s half will be placed in an account in her name. If she finds paid employment, she can continue making contributions to it. When she reaches retirement age, she will have her own super to cushion the effects of retirement.