DI­VORCE: WHAT IT MEANS FOR YOUR RE­TIRE­MENT

Finweek English Edition - - FRONT PAGE - BY JUSTINE OLIVIER

South Africa’s di­vorce rate is es­ca­lat­ing at a rapid pace, spik­ing from 39 573 to 50 517, up 28%, ac­cord­ing to stats from the depart­ment of jus­tice’s 2012/13 an­nual re­port.

While di­vid­ing up prop­erty and as­sets dur­ing a di­vorce may be a te­dious and of­ten stress­ful task, we have to ask what im­pact di­vorce has on your re­tire­ment fund? Does it re­main in­tact? Or is that, too, meant to be divvied up with your for­mer spouse?

Says Anele Mbuya, In­vest­ment Ac­tu­ary at Old Mu­tual: “This de­pends on how you are mar­ried, that is in terms of a civil mar­riage, civil union or cus­tom­ary mar­riage, and whether you are mar­ried in com­mu­nity of prop­erty, out of com­mu­nity of prop­erty with ac­crual or with­out ac­crual. How you are mar­ried de­ter­mines whether or not your pen­sion forms part of the joint es­tate.”

In case of com­mu­nity of prop­erty, the pen­sion or re­tire­ment fund forms part of the joint es­tate be­tween you and your spouse, he ex­plains. “If the pen­sion has not ac­crued, the non-mem­ber spouse would be en­ti­tled to claim up to 50% of the ‘pen­sion in­ter­est’ of the pen­sion. If the pen­sion has ac­crued, the non­mem­ber spouse would be en­ti­tled to claim up to 50% of the ac­tual fund value due to the mem­ber spouse,” says Mbuya.

In the case of out of com­mu­nity of prop­erty with ac­crual, he ad­vises: “The dif­fer­ence in growth of the two es­tates is shared at di­vorce, and a per­cent­age or por­tion of the pen­sion in­ter­est could form part of the joint por­tion of the es­tate for pur­poses of cal­cu­lat­ing ac­crual. Un­der such cir­cum­stances, the non-mem­ber

could be en­ti­tled to claim a por­tion of the ‘pen­sion in­ter­est’ for pur­poses of the ac­crual.

“In the case of out of com­mu­nity of prop­erty with­out ac­crual, the eas­i­est of the par­ties are sep­a­rated – the non­mem­ber spouse would not be en­ti­tled to the por­tion of the pen­sion in­ter­est nor any value of the pen­sion, un­less the par­ties con­sent among them­selves to as­sign­ing a por­tion, or if the court ex­er­cises its own dis­cre­tion and or­ders a re­dis­tri­bu­tion agree­ment.”

How­ever, Clive Hill, legal ad­viser at San­lam Trust, ad­vises that you have a strat­egy with re­gard to your re­tire­ment sav­ings dur­ing your mar­riage. “But if you are mar­ried 1) in com­mu­nity or prop­erty, or 2) out of com­mu­nity but with the ac­crual sys­tem, there is not much you can do to pro­tect your pen­sion in­ter­est. You could, how­ever, try to ne­go­ti­ate to trans­fer other as­sets, or pay a higher monthly main­te­nance, leav­ing your pen­sion in­ter­est in­tact.”

How­ever, some­times di­vorce or­ders are de­fec­tive as far as they re­late to the di­vi­sion of the mem­ber’s pen­sion in­ter­est. If the orig­i­nal di­vorce or­der did not al­low for a shar­ing of the pen­sion in­ter­ests, then it will not au­to­mat­i­cally be shared be­tween the par­ties as at the date of the di­vorce, says Nyapotse Inc at­tor­neys. “If the par­ties in­tended that the pen­sion in­ter­ests must be shared at di­vorce and the court or­der is si­lent on the mat­ter, the par­ties will have to go back to the High Court and have the di­vorce or­der amended. This will mean that fur­ther costs are in­curred. It is there­fore im­por­tant that the shar­ing of the pen­sion in­ter­ests is in­cluded in the di­vorce set­tle­ment ne­go­ti­a­tions from the start.”

It is a ne­ces­sity to there­fore hire a lawyer if you are in the process of get­ting di­vorced to en­sure that your set­tle­ment does not ex­clude any­thing that might be owed to you by your spouse, aside from the ex­pe­ri­ence and knowl­edge that they will bring con­cern­ing the laws gov­ern­ing re­tire­ment benefits. Don’t for­get that the spouse who is re­ceiv­ing the pen­sion in­ter­est has to pay tax on the amount.

Ac­cord­ing to Rus­sell An­der­son, con­sult­ing se­nior pol­icy ad­viser at the As­so­ci­a­tion for Sav­ings and I nvest­ment South Africa (ASISA), the fol­low­ing el­e­ments are es­sen­tial:

The di­vorce or­der must be is­sued by a High Court, Re­gional Court or Di­vorce Court.

The re­tire­ment fund mem­ber must still be a mem­ber of the fund at the date on which the di­vorce or­der is granted.

The mar­riage or re­la­tion­ship that ended must be one that can be dis­solved in terms of the Di­vorce Act.

The fund or funds against which the claim is made must be cor­rectly named in the fi­nal di­vorce or­der.

The or­der must prop­erly as­sign a rand value or per­cent­age of the pen­sion in­ter­est, as at date of di­vorce, to the non­mem­ber spouse (the party who is not a mem­ber of the fund). Ref­er­ence must be made to ‘pen­sion in­ter­est’. Phrases such as ‘pen­sion ben­e­fit’, ‘pen­sion fund’, ‘value’, ‘ benefits’, ‘fund in­ter­est’ or ‘in­ter­est in the fund’ must be avoided at all costs be­cause ‘pen­sion in­ter­est’ has a spe­cific mean­ing in law and is the cor­rect term.

The fund, and not the mem­ber spouse, must be or­dered to make pay­ment to the non-mem­ber spouse (it is not suf­fi­cient for an or­der only to state t hat an en­dorse­ment must be made in the records of the fund).

When asked if there were any tips for some­one to safe­guard their re­tire­ment sav­ings dur­ing a di­vorce pro­ce­dure, Hill says: “If you are al­ready mar­ried, save as much as you can in a pen­sion or RA to pro­tect your sav­ings against claims from cred­i­tors and from in­sol­vency. If di­vorce is in­evitable, re­dou­ble your sav­ings ef­forts.

“Re­mem­ber that while you are young you can take on more work in or­der to save more and make up lost sav­ings. It might sound trite, but too many South Africans come to re­tire­ment only to find that their in­come lev­els plum­met.”

IF YOU ARE AL­READY MAR­RIED,

SAVE AS MUCH AS YOU CAN IN A PEN­SION OR RA TO PRO­TECT YOUR SAV­INGS AGAINST CLAIMS FROM CRED­I­TORS AND FROM IN­SOL­VENCY.

SOUTH AFRICA’S DI­VORCE RATE IS ES­CA­LAT­ING AT A RAPID PACE, SPIK­ING FROM 39 573 TO 50 517, UP

28%, AC­CORD­ING TO STATS FROM THE DEPART­MENT OF JUS­TICE’S 2012/13 AN­NUAL RE­PORT.

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