When parties are considering the prospect of divorce, they often wonder what will happen to the assets and liabilities they have accrued during the marriage. One of these assets is a spouse’s pension interest in a pension / provident fund or retirement annuity.
Section 7(7)(a) of the Divorce Act provides that the pension interest of a party shall be deemed to be a part of that party’s assets unless the parties were married after 1 November 1984, by way of an ante nuptial contract excluding the operation of the accrual system.
In marriages in community of property this means that the pension interest will form part of the joint estate and will be subject to the division of the joint estate when the marriage comes to an end, either by death or divorce. Generally speaking, this means that a spouse who is not a member of the pension / provident fund in question will be entitled to a pay-out of a percentage of the other spouse’s pension / provident fund. In the recent decision of Ndaba v Ndaba, the Supreme Court of Appeal clarified that this entitlement is automatic and by operation of Law, meaning that courts need not specifically grant an order for this entitlement to be enforceable.
In marriages out of community of property where the accrual system is operational, a spouse pension interests in a pension / provident fund is an asset of their estate and a non-member spouse may be entitled to receive a pay-out from a spouse’s pension / provident fund, provided the pay-out is purposed for paying that spouses accrual claim.
In marriages out of community of property where the accrual system is not operational a spouse’s pension interests in a pension / provident fund forms part of the assets of their estate but a non-member spouse is not entitled to any pay-out from their pension / provident fund as their marital regime does not result in a joint estate or an accrual claim.
Despite a non-member spouse not being entitled to any pay-out from the other spouse’s pension / provident in marriage out of community of property, where the accrual is not operational, spouses have an occasion agreed to award a portion of their pension / provident fund to their spouse even though there is no legal entitlement for a pay-out to be awarded.
This practice recently considered by the Pension Fund Adjudicator who has ruled that a portion of a pension interest assigned to a non-member spouse in terms of a decree of divorce, may not be paid out when parties are married out of community of property where the accrual system is not operational.
No matter how parties are married, it is very important that they properly consider the consequences that may befall their pension interests in the event of a decree of divorce being granted by a court, either by agreement between the parties or by the court’s judgement in a trial