2020-01-29 06:01

PREVIOUSLY, a spouse could only claim from their ex-spouses pension fund on the date the member spouse retired, was dismissed or some other ‘exit event’ arose.

The law was changed in 2007 when the Pension Funds Act 24 of 1956 was amended to include the ‘clean-break’ principle.

This has had the following effect:

For people who were divorced prior to September 13 2007, the portion of the pension interest due to the non-member spouse is deemed to accrue on September 13 2007.

This means that anyone who was divorced prior to the above date may now claim the benefit they were entitled to, and they no longer have to wait until their ex-spouse retires or some other exit event occurs.

For divorces after September 13, the pension interest now accrues to the ex-spouse as at date of divorce.

The question then arises, is a provident fund included in the definition of a pension fund or pension interest?

The Supreme Court of Appeal handed down judgment on this issue on December 3 2019 in the case of M N v F N (714/201/8) [2019] ZASCA 185 [December 3, 2019]

The Court looked at the definitions of pension interest, pension fund and pension fund organization in the Divorce Act and Pension Funds Act, and referred to a publication by A B Downie titled Essentials of Retirement Fund Management (2019) para C2 at 12, which states that the Pension Funds Act does not distinguish between a pension and provident fund.

The distinction between the two only comes in when dealing with the Income Tax Act, in that the Income Tax Act specifies the manner in which the final benefit may be paid out.

The Court held that the reference to a “pension fund” or “pension interest” includes both pension and provident funds for the purposes of divorce proceedings.

Therefore, when a court awards an ex-spouse a portion of the pension interest in a divorce, that party is entitled to claim from their ex-spouse’s pension and provident funds, unless there is an agreement to the contrary.

The full case is available at -Carol Wheeler (Candidate Attorney)


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