divorce and your pension

Divorce and pensions

Posted  April 1, 2014

If you were married in community of property or with an ante-nuptial contract with accrual, then you are entitled to a share of your former spouse’s retirement funds. However, your divorce order has to comply with the Divorce Act as well as the Pension Funds Act or it could be deemed “unenforceable”. If this happens your options will either be to sue your ex-spouse in court for the value of the pension interest due to you or to apply to the court that issued your divorce order and have it amended. Save yourself and your spouse the time and trouble and make sure that your divorce order is compliant. Find out how.

The introduction of a clean-break principle in 2009 changed the way that your pension funds are split on divorce. Prior to 2009, the non-member spouse had to wait until the member spouse made a valid claim before their claim against the divorce order could be paid. For example, if Mr and Mrs Smith got divorced at the age of 38, she would have had to wait till he retired at 55 to receive her portion of his retirement annuity proceeds.

The clean-break principle allows the non-member’s portion of the retirement fund proceeds to be paid out or transferred to a fund of their choice as per a divorce settlement. So, the non-member spouse no longer has to wait until the investment matures.

Despite this amendment, couples continue to find themselves in the predicament where their divorce order has not been worded correctly and one party finds themselves out of pocket as a result.

This is what you and your divorce lawyer need to know:

  • When you take out a life assurance retirement annuity, the underlying policy belongs to the fund and not to you. So, you cannot “give” the retirement annuity to your spouse in a divorce order. However, both you and your spouse, in the case of a divorce, are entitled to the pension interest. 

(Pension interest on an RA fund refers to the total of the amount contributed up to a certain date (the date of the divorce) plus the accumulated interest.)

  • If you immigrate to another country and obtain a divorce there, you will have to apply to a South African court to have your divorce settlement recognised and enforced in this country. Your divorce order in another country will not be recognised by a retirement fund in South Africa.
  • The divorce order must specifically refer to a “pension interest” as per the Divorce Act.
  • The divorce order must set out either a percentage of the fund member’s pension interest or a specific monetary amount.
  • The retirement fund that has to pay out the pension interest must be clearly and correctly named in the divorce order.
  • If the divorce order does not comply with the Divorce Act, it can be over-ruled and you will only be paid out pension interest as per the retirement fund rules.
  • The retirement fund must be ordered to endorse its records and pay the pension interest as per the divorce order.

To avoid paying extra legal costs and possibly losing out on money you are entitled to, check that your divorce lawyer is aware of the intricacies and consult a financial planner, if necessary.

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