Divorces are tricky, particularly regarding the division of assets both people may have. If you are going through a divorce, it is important to know the ramifications for any retirement and pension funds you may have or are entitled to have. While retirement funds are generally protected from third-party claims, there are exceptions as permitted in the Pension Funds Act, the Income Tax Act, the Maintenance Act, and the Divorce Act. A pension fund always makes up part of the party’s Estate on divorce and so it can be instructed by the courts to pay part of the pension benefit to the member’s former spouse (the non-member spouse).
What does the law say when it comes to divorce and retirement funds?
For a fund to make a divorce payment, there must be a divorce order binding on the fund that meets certain conditions:
- The order must specify a percentage or a Rand value to be paid out of the pension interest assigned to the non-member spouse.
- The fund must be identified properly: “Retirement Fund” or “Pension Fund” is not enough.
- The divorce order must be valid.
- The member must be a member of the fund on the date divorce is granted.
Incorrectly drafted orders can delay getting any funds and require a court application to correct the wording in the order. Keep in mind that “pension fund” is a generic term that can refer to all retirement funds that fall within the bounds of the Pension Funds Act and includes all Retirement Annuities.
Understanding the division of assets where a pension fund is concerned
Regarding pension, provident, and preservation funds, the non-member spouse can be entitled to a portion of the pension interest. The pension interest is the total benefit the member would have had if their membership was terminated due to resignation on the divorce date. For a retirement annuity, the pension interest will refer to the total amount of a member’s contribution to the fund up to the divorce date and simple interest.
Blake Attorneys is best known for Family Law and regularly appears in the courts for divorce, maintenance, domestic violence applications and children’s court matters. We also have expertise in small business development and insurance litigation. Formed in 1998, we have been providing legal services in the Johannesburg area for over thirty years. Contact us to speak to an attorney today.