Compulsory retirement savings and matrimonial property

The savings are considered matrimonial property, so payments will be made from one spouse to the other on separation. The spouse receiving money could keep that quite separate from her (his?) own scheme, so could still get a top-up. The one paying would have to find the money elsewhere, and would not have the chance to get a top-up.

Section 31 of the Matrimonial Property Act 1976 allows for a scheme to be split, resulting in an assignment of future benefits rather than requiring an immediate cash payout from the policy-holder. A formula is agreed between the parties to determine what share of any future entitlements will be assigned from the policy-holder to the other. The scheme is still retained in the original holder's name. This means that he/she will apparently have a full entitlement, but will actually only retain a proportion of any proceeds. The other party will apparently have no entitlement and can obtain whatever top-up is due on his/her scheme, while then also receiving a share of that payable to the policy-holder.

The proposed scheme does allow for a direct split of contributions, however, with a transfer of funds from one fund into another belonging to the ex-spouse (see here). This is an improvement on the current situation. There is an additional side effect arising from this, however. Total contributions increase if one ex-partner is earning at a higher rate than the other and would have reached the required savings level before retirement, whereas the other does not reach that limit. Possibly countering this, it is proposed that single people not in de facto relationships get a single person's allowance on top of their RSS income in recognition of the greater costs of living alone, so government payouts would be higher (see here under "single people" ). This allowance is in addition to the top up proposed for all women irrspective of their earnings on the basis of their greater life expectancy (see here under "women" ) - note that no distinction is made on the basis of ethnicity, despite differences in life expectancy of rooughly similar magnitude.

Note also that, whether split or not, the whole sum accumulated to the date of separation counts as matrimonial property, even if contributions had been made for some time before the marriage.

Stuart Birks (email: K.S.Birks@massey.ac.nz)

Earlier version, 17 July 1997

Last updated 29 July 1997