By Hannah Mower
It is of paramount importance that the divorce settlement agreement be drafted by an attorney who specializes in Divorce Law in respect of the retirement fund clause.
It frequent that clauses are not in line with the expectations of the pension fund and the claim gets rejected.
An application to court is then necessary to rectify the Court Order. As ‘pension fund’ is a generic name for most types of retirement funds that fall within the scope of the Pension Funds Act, and a descriptor of a specific type of pension fund, one in which at least two-thirds of the retirement benefit must be taken as an annuity.
Other types of pension funds are provident funds, where the member may take the entire retirement benefit in cash, retirement annuity funds for retirement plans outside of the occupational/workplace environment, and preservation funds, to which benefits from a pension fund can be transferred.
It frequently happens in divorce cases that pension fund administrators reject settlement agreements on the basis that the clauses dealing with the pension interest payout to a non-member spouse are drafted incorrectly due to incorrect information provided or not enough information.
It is therefore of the utmost importance that the clauses dealing with pension pay-outs be drafted properly.
If not drafted properly, applications will have to be made to the court at great cost to amend or vary the settlement agreement.
The relevant provisions that control the allocation of un-accrued pension benefits to a non-member spouse upon divorce are contained in the Divorce Act 70 of 1979 and in the Pension, Funds Act 24 of 1956.
A claim under the Divorce Act can only be brought where the husband/wife or a partner in a civil union is still a member of the fund. Once he/she exits from the fund, usually on retirement or as a result of an early withdrawal, the benefit accrues to him/her, and there is no longer any ‘pension interest’ or unaccrued benefit. If the benefit accrues before the date of divorce, it must be dealt with as any other asset in the separate or joint estate.
Where couples are married or in a civil union in community of property, each partner will have a claim against the other’s pension fund. The claim will be for half of the pension interest on the date of divorce.
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