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I’m retired and I receive a defined benefit pension. How will it be treated in my property settlement?

I’m Retired And I Receive A Defined Benefit Pension. How Will It Be Treated In My Property Settlement?

You may be lucky enough to receive a superannuation pension payment because you belong to a defined benefit superannuation scheme, such as the State Superannuation Scheme, State Authorities Superannuation Scheme, DFRDB etc. You may be in the position that you cannot commute the entitlement ie you will always continue to receive a pension payment.

If you separate, how is this entitlement treated? What impact does it have on the property settlement?

We should list the steps in a property settlement, which are as follows:

  1. Determine whether it is just & equitable to make a property settlement order. If it is, then continue on.
  2. Compile a list of the property, including values.
  3. Assess the contributions.
  4. Determine whether or not there should be adjustments pursuant to s.75(2) of the Family Law Act eg because of care of children, disparity in income etc.
  5. Ensure that any order made is just and equitable.

It is also necessary to know that a family law lump sum value can be placed on the pension payment by doing a valuation in accordance with the appropriate regulations.

Some judges have taken the view that the pension payment should be considered separately from the remaining assets of the parties. Essentially, this approach means that the pension payment is simply a factor taken into account pursuant to s.75(2) when dividing up the other property. This means that the person who does not have the pension payment will receive a larger share of the other property than the share that they would have received had their partner not been receiving the pension payment.

Another view is to include the family law lump sum value of the pension payment in the list of assets, even though it can only be received as a pension payment and not as a lump sum. This can be done by lumping all the property together in one pool. More commonly, it is done by creating two pools of property. One pool being the non-superannuation property. The second pool being the superannuation.

In the case of Semperton & Semperton the husband received a DFRDB pension. The majority of the Full Court expressed the view that there was not a preferred or correct approach to be applied in these cases. The trial Judge has a discretion as to how super interests will be treated in a particular case.

In the more recent Full Court decision in Goudarzi & Bagheri (No.2) the Full Court said that the majority in Semperton “referred with obvious approval to the ‘two pools’ approach”.

It would seem that the prevailing view is to include the family law lump sum value of the pension entitlement in a second pool of assets comprising the superannuation.

Semperton made a few other points worth noting:

  1. You have to consider the nature, form and characteristics of the asset.
  2. You have to be careful not to double count. For example, if the family law lump sum value of a pension payment is included in the list of property then it would usually not be appropriate to take the pension payment into account when assessing adjustments pursuant to s.75(2) eg because of disparity in income.
  3. The family law lump sum value of the DFRDB pension has no regard to the fact that the payments are taxable in the hands of the veteran. In order to fully assess the nature and characteristics of the DFRDB benefit, expert evidence is needed on the taxation and pension consequences of the husband’s interest.

If you are involved in a case involving a defined benefit pension payment, then you need expert assistance. Please contact Alan Wright or Ashlea Taylor on 4929 3995.

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