The Divorce Act determines that a member’s pension interest in a retirement fund forms part of the member’s assets. A retirement fund includes a pension fund, provident fund, retirement annuity fund or preservation fund. The effect of this is that it will be taken into account when calculating the division of the parties’ assets during a divorce.
During settlement negotiations, the parties can determine the portion that will be awarded to the non-member. This will be noted in the settlement and same will be incorporated into the decree of divorce. A common mistake made by parties representing themselves is that they fail to comply with the Pension Funds Act and the Divorce Act. Failure to comply with the aforementioned acts results in pension funds refusing to pay the pension interest to the non-member.
Section 37D(4)(a) of the Pension Funds Act read together with Section 7(8) of the Divorce Act, sets out specific requirements with which a divorce order and/or settlement must comply to ensure payment to the non-member. The following must be included in the order and/or settlement:
- Specifically, refer to the non-member’s entitlement to the “pension interest”;
- The pension fund must be identifiable;
- The percentage of the “pension interest” or amount must be set out;
- The fund must be specifically ordered to endorse its record and make payment of the “pension interest”.
A closer look at the above-mentioned requirement reveals the following:
Specifically, refer to the non-member’s entitlement to the “pension interest”
“Pension interest” with regards to a pension fund is the benefit to which a member would have been entitled in terms of the rules of the pension fund if the member would have been terminated on the date of divorce on his account of his resignation from his office.
In regards to a retirement annuity, “pension interest” means the total amount of that party’s contribution to the fund up to date of the divorce, together with a total amount of annual simple interest on the contributions.
The Divorce Act specifically referrers specifically to “pension interest” and it is therefore of the utmost importance that the order and/or settlement complies with the Act.
The pension fund must be identifiable
Identifying the pension fund seems simple, however, numerous pension funds refuse to make payments as parties fail to properly identify the pension fund. The following must be included to identify the fund:
- The name of the pension fund;
- The member number and/or policy number;
The percentage of the “pension interest” or amount must be set out
The percentage or amount that should be paid to the non-member must be clear. In the matter of Areias v Momentum Retirement Annuity Fund and Another [2013] JOL 30007 (PFA) the settlement read as follows:
“It is recorded that policy number 62028677 in the name of MANUEL shall continue to be paid by MANUEL and that on maturity date the value thereof shall be paid out in equal shares to MANUEL and RITA.”
And
“It is further recorded that policy number 61971673 in the name of MANUEL shall continue to be paid by the said MANUEL and on maturity date in the year 2006 shall be paid out in equal shares to MANUEL and RITA”.
It was determined that the usage of the wording “equal shares” is not sufficient enough and the pension fund had no duty to pay the non-member. One can argue that “equal shares” means 50%. If the first requirement is taken into account the above fails to refer to “pension interest”. Thus it is not clear what should be taken into consideration when calculating the “equal shares”.
The fund must be specifically ordered to endorse its record and make payment of the “pension interest”
In the matter of Rampa v Sentinel Mining Industry Retirement Fund [2014] JOL 31450 (PFE) it was held that for a court order made in terms of the Divorce Act to be enforceable, it must specifically order the pension fund to pay the portion to the non-member.
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Conclusion
If the divorce order and/or settlement agreement does not comply with the requirements of the Divorce Act and Pension Funds Act a pension fund has the right to refuse payment. This can be rectified but requires a separate court application to amend the settlement agreement. This is an unnecessary application that has a cost implication that is avoidable by approaching an attorney firm to assist you with the settlement agreement. This will ensure compliance with all the relevant Acts.
