About 20 years ago, legislation was introduced to allow superannuation to be treated as property and split when a relationship breaks down. The Family Law (Superannuation) Regulations 2001 set out methods and factors on how to calculate the current value of the entitlement. However, the question sometimes is raised as to how much of the current value is from accrual during the relationship. This is a simple question – but one that is not always easy to answer.
Some of the issues can be illustrated by using an example of (say) one of the Federal defined benefit schemes e.g. Commonwealth Superannuation Scheme (CSS). A Form 6 can be obtained for the information at the commencement of the relationship. Taking this historical value off the current value doesn’t give the accrual during the relationship. We need to consider how to update it to the present time.
The first thought a client will have is to update the components. The design is a hybrid – some accumulation and some defined benefit. So, the special methods and factors is a probability mixture of benefits that may result from a 54y 11m exit (account related) or after that (formulae related) with indexed, non-indexed and lump sum choices. This approach will not work. Nor will a proportional approach of before and after relationship durations. An approach that may be worth considering is to update the marriage start date value by the “base amount” earnings rate to a current value.
It can get more complex – the pension phase may have commenced! Here I would suggest that the pre-relationship value percentage is calculated at retirement date. The current value decreases as life expectancy reduces. Applying the percentage to the current value effectively means monies have been proportionally drawn from each component.
Many accruals during relationships may be simple to calculate. Some may be simple in concept (such as an industry fund account balance), but have availability of historic data challenges. However, if you need this information for the matrimonial property settlement negotiations, we certainly can provide an additional section to our family law valuation report considering this matter in more detail.
Brian Bendzulla
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