When you and your spouse decide to get a divorce, there is much more to consider than just ending your personal relationship. Whatever assets you have accrued between the two of you and individually during the years of your marriage have to be divided in the way the law prescribes. The Divorce Act includes a member’s pension interest in a retirement fund among these assets, which means that it must be taken into account during the divorce settlement. Here are the key facts about how a retirement fund is included in divorce in South Africa.
In what instances can a pension fund make a payment to an ex-spouse?
Since an individual’s interest in a pension fund, retirement fund, provident fund or similar financial instrument, is regarded as one of that individual’s assets, it will usually be included in a divorce settlement. The court may include an order for a portion of one spouse’s pension interest to be awarded to the other spouse. However, it is important to remember that there is a set of very specific conditions that must be met in order for such an award to be made. The essential requirement is that a binding court order must be issued, in which instructions are given for the payout, and these instructions must be in strict compliance with both the Divorce Act and the Pension Funds Act. The Divorce Act states that the spouse who is not a member of the pension fund may be entitled to a portion of the other’s spouse’s interest. This provision will always apply to marriages in community of property; and in most cases of marriages out of community of property, where the accrual system applies. In cases where an antenuptial agreement has expressly excluded the accrual system, no assets will be shared in a divorce court.
How is the pension divided?
The Divorce Act defines “pension interest” as the sum that the fund member would have been entitled to claim if they retired from the fund on the date of the divorce. In the case of a Retirement Annuity, the member’s pension interest is defined as all contributions (payments) to the fund, plus simple interest on those contributions. Usually half of that sum will be awarded to the non-member spouse, in an in-community marriage. An exact percentage or an exact amount can be agreed or will be chosen by the Court in the divorce decree in an accrual marriage out of community. A court will determine the amount after considering all the factors in the case, if the parties do not reach agreement.
Blake Attorneys is a legal firm in Johannesburg, with considerable experience in family law, including divorce. Contact us for more information on retirement funds in divorce in South Africa, or to book a consultation with a divorce attorney.