Divorce details

Divorce has financial implications, even on your pension. X10 Investments outlines what impact you can expect on your long-term savings.

One of the advantages of a retirement fund is that these savings are protected from third-party claims, other than those permitted by the Pension Funds Act, the Income Tax Act and the Maintenance Act.

A pension fund is permitted to pay a portion of the pension benefit to the member’s former spouse.

A fund can only make a divorce payment if the divorce order is binding on the fund. If the divorce order isn’t binding, the administrator should inform the non-member spouse accordingly and the court order must be amended.

The Divorce Act provides that pension fund savings form part of the member’s assets in a divorce, and must be considered when dividing the marital assets. On divorce, the non-member spouse may be entitled to a share of their ex-spouse’s pension interest.

This doesn’t apply to a marriage out of community of property, by way of an ante-nuptial contract that excludes community of property, community of profit or loss, or the accrual system.

This share must be set out in the settlement agreement. If the parties haven’t agreed to a settlement, the court can make the order.

The definition of “pension interest” implies the divorce order must have been granted before the member exited the fund. Once the member has withdrawn from the fund, no pension benefit remains, therefore the pension interest is zero. The non-member spouse would then have to recover their share from the member spouse directly.

Further to this, the Pension Funds Amendment Act, 2007, introduced the cleanbreak principle. This allows the non-member spouse to access their former’s spouse’s retirement fund benefit, and have an amount or percentage paid out, or transferred to another fund.

The “pension interest” assigned to the non-member spouse is deemed to accrue to the member on the date of the divorce decree.

The non-member spouse is entitled to the return from when the deduction is made until the payment date, but not to any other interest or growth. It can take eight months to effect a pay-out if documents are in order.