Co-Author Eden Palmer
There is no formulaic approach to how matrimonial assets are treated by the courts in Auckland and Auckland. The Matrimonial Causes Act 1973 confers wide discretionary powers on the courts over the assets of the parties to a marriage. The courts follow the legal principles enshrined in this legislation and established case law in determining what a suitable financial agreement looks like upon divorce.
When considering how assets acquired during the marriage should be divided, the starting point is that they should be divided equally. This is known as the yardstick of equality. However, the overriding principles of needs, compensation and sharing allow for the court to deviate from an equal division of the assets.
Pension Assets
Matrimonial assets fall into three categories: capital, pension, and income. Therefore, pension assets will be available for sharing when working through the financial issues that arise on divorce. The court can make a pension sharing order, where an order is made to divide the pension funds at the time of the divorce, or a decision can be made for one party’s share of the pension to be offset against other assets available, e.g. property.
It is often the case that some pension assets will have been accumulated prior to the marriage. The treatment of such pre-accrued pensions can be a contentious issue. There are many factors that will be taken into consideration by the court, such as the length of marriage, the value of the pensions, and the age and needs of the parties. However, there is no one size fits all approach to working out what happens on divorce to a pension, or part of a pension, that was accrued prior to a marriage taking place.
Pensions – a case-by-case basis
The division of any pensions, including elements accrued prior to the marriage, is decided on a case-by-case basis, with individual factors of the case taken into consideration. In the context of a short marriage of less than 5 years, it can be argued that it would be unfair to share pensions accrued prior to the marriage, and it is possible that such a pension would be excluded from any calculation to determine the financial agreement upon divorce. However, in the context of a longer marriage, pre-accrued pensions may be open to sharing and the court will look to equalise pensions. The primary aim for the court is to achieve a fair outcome and ensure that the needs of the parties are met. The court will consider the criteria set out in s.25 of the Matrimonial Causes Act when considering how pension assets should be divided on divorce. The court will consider circumstances of the case, with a view to ensuring that both parties are able to meet their income needs in retirement.
Options for pension sharing
If both parties pension assets are of similar value, they may decide to agree to simply retain their own pensions. However, if one party has a pension of a significantly larger value, the parties may choose to offset the pension against other assets, e.g. property. This could see one party retain more of the liquid assets, such as a house or investments, while the other retains the illiquid asset, the pension. Whilst pension offsetting can be attractive, as it keeps things simple and provides for a clean break, it can leave one spouse with little or no provision for retirement and the other with little provision to rehouse.
Working through issues
If there are issues when agreeing how a pension acquired before a marriage is shared upon divorce, it is advisable to use an alternative method of resolving disputes. Using Alternative Dispute Resolution (ADR) methods such as Mediation, the Collaborative Process or Lawyer Negotiation may mean that issues can be resolved outside of court.
To understand how pension assets are shared upon divorce, it is advisable to consult with an experienced family law solicitor to decide the best way for you to resolve these issues without causing unnecessary emotional and financial issues. They can provide guidance based on the law and the specific details of your situation. Family law can be complex, and legal advice can help you navigate the process and understand your rights and obligations. Please contact us for a confidential, no-obligation conversation.
Victoria Burrows is a Senior Associate in our Horsham office.
