Sort out your KiwiSaver split now, even if it's years until you retire.
Seven out of 10 couples getting a divorce don't discuss splitting their retirement savings.
That statistic left me shaking in my financial britches. It's a figure from the 2017 Women and Retirement Report from Scottish Widows – a UK fund manager.
The result of this lack of pension-chat generally leaves divorced women out of pocket, for the simple reason that the male paunch tends to be larger.
Can that 70 per cent figure really be true? I dug a bit deeper to make sure the sample size was decent and yes, the stats involve a survey of thousands of people.
If it's the case in Britain, it's likely to be the same here in New Zealand. Our grandmothers' came from the ask-no-questions generation, but it seems the affliction has been passed down.
Women have lower retirement savings balances, on average.
A pension fund, or KiwiSaver as we call it, is relationship property. After our homes, it's often our biggest asset.
In a divorce each partner's fund is valued and you'll generally share 50/50. It can be sorted out in a number of ways from one party taking more of the other assets ("offsetting") to a court order where the fund manager is instructed to move money to the spouse who has a lower-value fund.
Since KiwiSaver began, 87,000 of us got divorced. If 60,000 of us aren't talking about it, we've got a big problem.
The only possible reason 70 per cent of people failed is surely down to confusion. Maybe it's the fact you can't touch these savings until you're 65. Is it assumed that divorcing 10 or 20 years before retirement is just tough luck? An ex certainly won't rock up on your doorstep with a cheque in a couple of decades.
But every fund has a value today. In one push of button a bank or fund manager can tell you what that is.
Let's be clear. It's irrelevant this money is locked up until age 65 in the name of one spouse. It's part of your joint net-worth and needs to be talked about and divided. You wouldn't leave cash sitting in a bank account and gift it to one party, so don't do it with KiwiSaver. The main exception to the rule comes from retirement savings that pre-date your relationship. Additions and their returns after this date are joint property.
The inequality of dollars and sex
When it comes to the economics of divorce, the dollars and sex don't always work out fairly. It's a well-known fact that men have larger pension pots than women. Gender pay gaps, career breaks for family and a female skew towards lower-paid jobs cause the issue.
Divorce Survey findings:
Seven out of 10 couples don't consider pensions during divorce proceedings, leaving women short-changed.
48 per cent of women and 41 per cent of men say they have no idea what happens to retirement savings in a divorce
22 per cent of women and 18 per cent of men presume each partner keeps their own retirement pot.
56 per cent of married people would fight for a fair share of a joint property, 36 per cent want to split combined savings, 13 per cent are worried about losing a pet and 9 per cent want a share of their partner's pension.
After a divorce, 24 per cent of women say they are unable to save anything towards retirement, versus 12 per cent of men.
40 per cent of women say their retirement prospects worsened after a divorce, compared to 19 per cent of men.
A local ANZ Bank survey reported average KiwiSaver balances amongst their clients to be 28 per cent lower for women than men. They estimate the average male will have $203,000 in their fund to last 14 years in retirement. Females will have $144,000, but live longer, so it needs to last 20 years.
Keep your half invested
The lesson is clear – if you are the lower-earning spouse in a relationship, male or female, find out what you are entitled to. In the eyes of the law these are joint savings.
While off-setting against other assets is a temptation for many (especially the party taking greater responsibility for children) think it through carefully before grabbing at it. Downsizing a house and keeping your half of the retirement savings invested will serve you well further down the track. All those years of compound returns can't be made up for later on.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.