Divorce and pension
Can I lay claim to my ex spouse’s pension fund? Previously a divorced spouse had no claim to the spouse’s retirement fund benefits – the reason for this was that the pension fund of a spouse was not regarded as an asset in the joint estate of the parties. Since 1989 this has changed to allow the non-member spouse the right to share in the retirement fund benefits or more correctly the “pension interest” of the member spouse, depending on what type of marital system the couple had entered into. „Pension interest‟ is defined in the Divorce Act for every type of fund except a preservation fund. According to the Pension Funds Act, „pension interest‟ may be any one of the following types:
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- Pension and provident fund
The benefits to which a member would have been entitled to in terms of the rules of the fund if his/her membership had terminated, due to resignation, at the date of the divorce.
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- Retirement annuity
The sum of the member’s contributions to the fund up to the date of divorce plus simple annual interest at the prescribed rate.
How much pension can I get?
The Divorce Act states that the non-member spouse is allowed to entitled to “the portion of the pension interest which is assigned to the non-member spouse in terms of a decree of divorce or the dissolution of a customary marriage and is deemed to accrue to the member on the date on which the decree of divorce or decree for the dissolution of a customary marriage is granted”. Married in community of property: the pension interest of the member spouse is considered as part of the joint estate and the non-member spouse is entitled to claim 50% of the pension interest of the member as at the date of the divorce. Married by ante-nuptial contract with the accrual system: the value of the spouse’s pension fund is used to calculate the value of his/her estate. If the couple is married out of community of property with the accrual system, and if they excluded the pension benefits in the ante nuptial contract, then the pension interest would not be part of the estate when the marriage ended.
What does the “clean break principle” mean?
The Pension Fund Act favours a clean break principle. In laymen ‟s terms it means the right of a nonmember spouse who is married in community of property to receive immediate payment or transfer of the portion of the other spouse’s pension interest on divorce. “In terms of the Pension Fund Act, the non-member spouse can choose to have the pension interest award paid out in a lump sum in cash or can have it reinvested into another retirement fund. Should the non-member spouse opt to have the monies paid out to him or her as a lump sum, there are tax implications. If the monies are transferred to another retirement fund, it will be done tax-free. Hence this decision (to receive the money as a lump sum) should be carefully thought out. Practice has taught us that in most cases the fund has 45 days, after receiving the divorce order, to request the non-member spouse to elect how the pension interest must be paid. The non-member spouse then has 120 days in which to make a decision.
What if a spouse resigns before the divorce is finalized?
If the member spouse resigns from his or her employment before the divorce order is finalized, and no notification has been given to the fund by the non-member spouse that fifty percent of the proceeds is due to the non-member spouse, the fund will not be required or held liable to ensure that the nonmember spouse’s rights in this regard are protected.
The wording is of utmost importance
It is of utmost importance that you get the correct details of your spouse’s pension fund the detailed fund name, policy or fund number and full address and details of the pension fund. If the fund is not properly cited in the divorce pleadings the court will not be able to make any such order. For that reason, it’s important to ensure that your attorney is competent in divorce proceedings so that the fund is correctly cited to ensure that the court can indeed make the appropriate order regarding the pension interest of the member spouse.
Interesting article on pension funds: Should you require more information, have a look at an information booklet distributed by Sanlam that deals with pension funds after divorce.