According to Statistics South Africa, in 2021 the Department of Home Affairs registered 106 499 civil marriages, 2 676 customary marriages and 2 240 civil unions. During the same year, the department registered 18 208 divorces. An issue that sometimes enjoys little attention is the division of assets built up by the divorcing parties to provide a carefree retirement, By Brett Ladouce
If you are married in community of property or out of community of property, but with the inclusion of the accrual system and/or with the inclusion of community of profit and loss, your retirement fund savings (“pension interest”) will be deemed to form part of the assets that the divorce court can divide between you and your soon-to-be ex-spouse.
The court that issues the divorce order can order your retirement fund to pay a portion of your pension interest to your spouse. The Divorce Act defines “pension interest”, in relation to an occupational retirement fund, as the withdrawal benefit that you will be entitled to in terms of your employer-based retirement fund if you resigned on the date of your divorce. If you, for example, would have been entitled to a withdrawal benefit of R500 000 from your retirement fund if you resigned on the date of divorce, then the pension interest will be R500 000. The pension interest value will always be equal to the withdrawal benefit as of the date of divorce.
In relation to a retirement annuity fund, “pension interest” is defined as the total contributions the owner of the policy made up to the date of divorce plus interest on the contributions calculated at a prescribed interest rate. Depending on the investment growth of the money in the retirement annuity fund measured against the prescribed interest rate, it is possible for the pension interest amount to differ from the fund value on the date of divorce.
If you are married out of community of property without the accrual system and without community of profit and loss after 31 October 1984, your pension interest will be excluded from the assets that the divorce court can divide between you and your spouse at divorce.
There is no rule that states that your soon to be ex-spouse is entitled to 50% of the pension interest. You and your spouse can negotiate what portion of the pension interest will be payable to your spouse, but it cannot be more than 100% of your pension interest.
The divorce order must meet the following requirements before your retirement fund can pay a portion of your pension interest to your ex-spouse:
The fund that must make the payment must be correctly identified. If you are, for example, a member of the ABC Pension Fund, the divorce order must refer to ABC Pension Fund. The order cannot refer to ABC Provident Fund, ABC Retirement Fund or ABC Pension Preservation Fund. It must be possible to identify the correct fund from the wording of the divorce order.
It must refer to the division of the pension interest of the member. References to provident interest, pension benefits, retirement benefits, member share, fund credit and fund benefits are not acceptable as “pension interest” has a specific meaning in terms of the Divorce Act.
There must be an explicit order against the retirement fund to make payment to the non-member spouse. The order must, for example, contain the following wording: “The ABC Pension Fund is hereby ordered to pay 60% of the pension interest of the Plaintiff (member spouse) to the Defendant (non-member spouse.)” Payment cannot be made by the fund if the fund is only ordered to make an endorsement in its records that payment must be made to the non-member spouse.“
If you and your spouse decide to get divorced, ensure that you include the pension interests of all the funds that both of you are members of in the discussion regarding the division of all assets in an equitable manner.
* Ladouce is a pension funds lawyer and the author of Pension for Palookas.
PERSONAL FINANCE