The Family Law Amendment (Superannuation) Act enabled superannuation interests to be included in the matrimonial property assets and split like any other asset. It also set out methods and factors on how a present value was to be assigned to an entitlement that would only be payable at some time in the future. It is not dissimilar to saying that on average Australian mortality experience we expect you to live another 40 years. The value to be used doesn’t allow one to argue that one’s health is good or bad. Likewise, one doesn’t have the opportunity to say that their salary experience will be below average increases or that they don’t intend to take a retirement benefit but rather will take a resignation benefit next year and change careers.
The intended simplicity of this approach is being overtaken by debate at the split percentage stage. Typically, what people want to know is what in the current benefit value at 2016 was generated during the period of the relationship. In other words, how much should we exclude for the pre and post relationship period. This is not an easy amount to quantify. Sometimes you see the pre relationship period excluded but accruals since the breakdown included. Sometimes you see debate about when the relationship started and/or ended.
In the past, there was an attempt at very rough equity by time apportionment. More recently, there is an awareness about how rough is this approach – especially with accumulation benefits. Also, if the relationship extended over a period of time it is not unusual to see one fund rolled over to another fund with changes in terms and design. Often the amount of historical data that can be supplied about: salaries; crediting rates; yearly accruals; and contributions is limited.
A defined benefit value can jump sharply with a large salary rise. An accumulation benefit can drop sharply with a poor stock market year. It can be argued after the relationship ended that adjustments at the “base rate” should apply or (alternatively) that actual experience should be taken into account.
My observation is that NetActuary can assist in providing information to help the parties meet an agreement, but that firstly far more attention is needed to them agreeing upon what is a fair and equitable approach e.g. the present value excluding both pre and post relationship periods with experience since the separation date excluded i.e. base rate increases. This can be done in a way that doesn’t compromise an expert witness obligation to the Court rather than the person requesting the report.
The NetActuary Team