The Payment of a Divorce Benefit from a Pension

This article deals with the various time limits that are involved in regard to the request for payment, and the time that is allowed to Funds within which to make the payment

Source: Darryl Morris of McLarens Attorneys
One of the consequences of the dissolution of the marriage is the division of the joint estate, and the distribution of the assets between the husband and the wife. Often, there are no assets to be divided. The law has recognised this and has provided that the pension interest of a spouse who was a member of a pension fund may be factored into the calculation of the division of the joint estate. The Divorce Act, 70 of 1979 makes provision for this. Section 7 (7)(a) provides that the “pension interest” of a spouse who is a member of a pension fund will form part of the calculation for the purposes of the division of the matrimonial assets. The Court granting the decree of divorce may order that a portion of this “pension interest” be paid to the other party.
 The Divorce Act defines this “pension interest” as the amount that a member would receive from the fund if he or she were to leave the fund as a result of the resignation from office – i.e. on resignation from employment, on the day that the divorce order is granted.
 The Act also provides that a retirement annuity has a “pension interest” and this is also accessible by the non member spouse. The “pension interest” from a retirement annuity is the sum of the contributions made, together with simple interest.
 The difficulty with this legislation was that the non-member spouse could not access the “pension interest” until the spouse who was a member left the fund, either as a result of his or her death, resignation or retirement. So this “pension interest” due and payable to the non-member spouse was ring fenced (with no growth or interest) and could only be accessed when the member died, or retired, or resigned from employment. This was rectified, and in 2009 the Pension Funds Act (No. 54 of 1956) was amended to provide specifically for the payment of this “pension interest” without having to wait for the member spouse to leave the fund.
The 2009 amendments allow for the non-member spouse to immediately access the benefit from the pension fund. The spouse is no longer forced to wait for the member spouse to resign, retire or die.
 In terms of section 37D of the Pension Funds Act, the pension interest is calculated and must be deducted by the fund’s administrator. The fund concerned must advise the non-member spouse that an election must be made with regard to whether the benefit must be paid to the non-member spouse in cash or transferred to another fund. The fund must advise the non-member spouse within 45 days, to make the election.
This election must be made by the non-member within 45 days from the date that the fund requests or invites him or her to make the election. At this time, the non-member spouse must instruct the fund to pay him or her the amount in cash or to transfer it to another fund. If he or she wants the money in cash, full details of the account and how the payment is to be effected is to be given to the fund.
Once the fund has received the instruction, the fund has a period of 60 days within which to make the payment.
If the non-member spouse does not make the election within a period of 120 days, then the fund will simply pay the money over to the non-member spouse in cash.
Any budgetary or financial arrangements by the non-member spouse, must therefore take account of the time period within which the fund will make the payment.

Click to view our Website Disclaimer

Leave a Reply

Your email address will not be published. Required fields are marked *