Securing Your Golden Years: Pension Funds in Divorce and Their Implications

The High Court recently granted a decree of divorce, incorporating a deed of settlement in which the applicant was entitled to 50% of the respondent’s pension interest. However, after being served with the summons, the respondent resigned from his employment and exited his retirement fund. Therefore, at the time that the divorce was granted, the respondent effectively no longer had any pension interest albeit that his pension benefits were still held by the policy provider.

Subsequently, the applicant approached the policy provider to receive the benefits, which she understood to be due to her. To her surprise, she was informed that the divorce order was not enforceable due to respondent’s exit from the relevant fund. Put differently, only a pension benefit was held by the policy provider, not a pension interest. The applicant then approached the High Court to have the order amended to replace the wording “pension interest” with “pension benefit”. The Court was hesitant to make such an amendment as an "accrued pension benefit" is not legislatively recognised. The Court accordingly found that the original order could not be enforced in terms of s7(1) and s7(8) of the Divorce Act 70 of 1979 as these sections deal with a pension interest, which interest the respondent did not have at the time of the divorce.

These findings highlight the position that once a pension interest is paid out, it is no longer part of that person’s ‘estate’ for the purposes of a divorce so long as that ‘benefit’ is still held by the fund in question. Notably, however, this reveals a lacuna (gap) in our law as the definition of a “pension interest”, as per the Divorce Act, is worded in such a way as to exclude the confines of a pension benefit. Had the benefit been paid into the account of the respondent, then it would have formed part of his estate, and the applicant would have been entitled to the funds. There is currently no legal framework that adequately deals with non-member spouses claiming pension benefits directly from the pension fund itself.

In addition to the aforegoing, the Court held that the applicant was ill-advised by the policy provider to approach the Court to vary the order and should have instead approached the Court to challenge the legal framework itself. In concluding, the Court reiterated the position that a non-member spouse can only claim parts of their member spouses’ contributions plus investments, which will conveniently be referred to as “pension interests” for purposes of a divorce. This, however, is only the case if the member spouse is still an active member of the fund as at the date of divorce.

The interpretative findings of the Court pose questions as to the fairness of divorce proceedings insofar as pensions are concerned, specifically with regard to the recourse available to a non-member spouse in the context of a pension benefit. Until such a time that the legislature remedies this lacuna, non-member spouses engaged in divorce proceedings ought to be advised of the risks in seeking a pension interest for the purposes of reaching a settlement agreement.  

Written by Jabu Price Moor

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This article is provided for informational purposes only and should not be substituted for legal advice on any specific matter. Any opinions expressed herein are subject to the law as at the time of writing and will change in accordance with any change in the law. We recommend that you contact HJW Attorneys at info@hjw.co.za directly for advice applicable to your specific matter.