Govt fund’s divorcee payout policy ‘unconstitutional’

Published Jul 3, 2011


The Cape High Court yesterday declared the law governing the Government Employees Pension Fund (GEPF) inconsistent with the constitution because it prevents the fund from paying out benefits to the divorced spouses of members, which is the case with other pension funds.

The court gave the government a year to remedy the situation, but the State has already taken the first step to introduce the clean-break principle in retirement benefits for divorced members of the GEPF.

Last Friday, the government published a draft bill that proposes amending the Government Employees Pension Law to allow the GEPF to change its rules and pay out benefits awarded in terms of a court-sanctioned divorce order or a decree for the dissolution of a customary marriage to non-member former spouses of the fund’s divorced members.

The High Court case was brought by Mathilda Wiese, of Malmesbury, the former wife of a policeman. She said it is unfair for the GEPF not to allow her to access retirement benefits that were awarded to her in a divorce order, because divorcees whose former spouses belong to other retirement funds can access their share of the pension interest.

Wiese and her lawyers, Riaan Nabal of Borman & Hayward Inc and advocates Johan de Waal and Deidre Kusevitsky, asked the court to provide an immediate remedy by reading in to the Government Employees Pension Law the same clauses allowing the clean-break principle as are contained in the Pension Funds Act.

The clean-break principle was introduced into the Pension Funds Act, which governs most occupational retirement funds and retirement annuities, by way of an amendment in 2007.

However, the GEPF and a number of other retirement funds to which the State contributes – including those for Transnet, Post Office and Telkom employees – are governed by their own Acts, which have yet to be amended to introduce the clean-break principle.

High Court Judge LJ Bozalek did not grant the immediate relief Wiese sought, but said if the government failed to remedy the current unfair situation within a year, a clause would be read into the Act to bring about the relief Wiese sought.

The GEPF and the Minister of Finance, Pravin Gordhan, have agreed the situation is unfair, but opposed the relief sought by Wiese and argued for more time to bring before parliament an amendment to the law governing the GEPF.

The judge awarded costs against the minister but not against the fund, because it was prevented from changing its rules by the law governing it.

If the bill published last week is enacted as proposed, any former spouse of a GEPF member who has been awarded a portion of the member’s retirement benefits in terms of a divorce order or a decree dissolving a customary marriage will be able to access those benefits as soon as the amendment is enacted.

Currently, non-member former spouses have to wait until their GEPF member former spouse leaves the fund as a result of retirement, resignation or death, before the benefits are paid out. This can be many years, and in that time the non-member former spouse is denied growth on his or her portion of the benefits.

The bill proposes that a pension interest in the GEPF that can be divided by a divorce order be defined as the benefits to which a member would have been entitled if the membership was terminated on the date of divorce or dissolution of a customary marriage.

Although the GEPF is a defined benefit fund that provides a pension based on its members’ years of ser-vice and final salaries, the explanatory memorandum to the bill notes that introducing the clean-break principle will not have any financial implications for the State.

Any former spouse whose claim has already been submitted against the GEPF and refused may resubmit the claim to be dealt with under the amended law, the bill says.

The GEPF is the largest retirement fund in the country with 1.2 million contributing members. There are likely to be many divorcees among the GEPF’s members.

Wiese told the Cape High Court she desperately needs the money to pay off her share of debts incurred by her and her former husband, Cornelius Marx, and to support a child from a previous marriage.

The court order means she has to wait up to a year before the law is amended and the fund changes it rules to enable it to pay her and other divorcees their benefits.

In their submissions to the court, the GEPF and Gordhan admitted that the fund’s different treatment of divorcees needs to be addressed, but argued that parliament must amend the law because it has to decide on certain policy issues, and the fund needs to negotiate any rule amendments that affect fund members’ conditions of service with the bargaining councils.

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