When is a Spouse a 'Spouse', Pt 1? Separation Meets Superannuation: The Defined Benefit Question

Separated, under the one roof, and reliant on the one pension - complexity will ensue.

Life is rarely neat when it comes to money, relationships, and retirement.

One listener’s story highlighted just how complex things can become: a couple married for 25 years, separated but still living under the same roof, and relying on a defined benefit pension.

The key question?

What happens if the pension holder dies.

Defined Benefit Pensions: A Different Kind of Super

Most Australians today have “defined contribution” super – where your balance grows based on contributions and investment returns.

A defined benefit pension works differently.

It pays a guaranteed income, often for life, generally based on years of service and salary history. They are rare now, but can be quite powerful for those who have them.

We also need to note that, in a separation, superannuation is still part of the property pool. Even defined benefit pensions can be valued and split, though it’s complicated. (This is beyond the scope of our blog and podcast, but if interested, Jordan recommends checking out Super Info: Online Superannuation Calculators | Super Info for more information).

In saying that, as we've discussed in other episodes - there's a lot of flexibility in how couples can arrange their finances following their separation.

It's not common, but couples sometimes agree on informal arrangements to share the pension while living apart, recognising that splitting could make retirement harder for both.

Reversionary Pensions: Who Gets Paid After Death?

Many defined benefit pensions allow for a “reversionary” arrangement, where payments continue to a spouse after the member’s death.

But here’s the catch:

• Reversionary nominations are locked in when the pension starts.

• Only certain beneficiaries qualify – typically a spouse or someone in an interdependency relationship.

• Definitions of “spouse” vary between super law, Centrelink, and family law.

This creates uncertainty and uncertainty creates risk and risk creates complexity.

If a couple is separated but still under one roof, are they spouses?

Are they merely housemates of convenience?

Trustees of the super fund decide, and their definitions may shift with policy or case law.

Living With Ambiguity

For many in similar situations, there isn’t a perfect answer.

Decisions in one area – such as formally separating – can trigger unintended consequences elsewhere.

That’s why getting advice matters. A professional can help map the trade-offs so you can decide which compromises you’re prepared to live with.

Closing Thoughts

Superannuation, separation, and estate planning rarely follow straight lines. But talking openly about the uncertainties and seeking guidance early can make a difficult situation a little clearer.

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