Divorce means more than just parting ways with your partner. It may also involve parting ways with your assets. The Divorce Act states that your retirement fund forms part of your assets. This means that it will be considered when dividing up your assets.
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Current divorce law provides that a non-member spouse in a divorce action may share in the pension benefits of the member spouse. The duration of the marriage does not disqualify a non-member spouse this right as there is no minimum requirement.
However, for the pension fund to pay out the divorce payment, there are certain conditions that must be met:
- The member must still belong to the fund at the time the divorce is granted.
- There must be a valid divorce order that clearly states the amount that must be paid to the non-member spouse.
- The divorce order must also clearly identify the fund’s name.
- The order must also be directed to the fund instead of the non-member spouse.
How do you determine how much you’re entitled to?
How much you can claim from your spouse’s pension fund will depend on the kind of marriage you had.
“Whilst it is not a given that one party will be awarded part of the other’s pension interest, technically a party can be awarded between 1 to 100% of the other party’s pension interest, depending on the circumstances,” says Anton Swanepoel, head of legal services at Sanlam Corporate.
If you were married in community of property, you will receive 50% of the other spouse’s pension benefits. If your marriage was out of community of property with the accrual system, the redistribution of assets will be done according to a prescribed formula, says Mlulami Nxele, legal adviser at Allan Gray.
This means that the spouse whose accrual during the marriage was smaller is entitled to half of the difference of the accruals between the spouse's estates.
A spouse's pension benefits will, therefore, be considered when the accrual is calculated.
If your marriage is out of community of property without the accrual system, you will keep your own estate. You and your spouse will not have a claim against the other’s pension benefits, adds Nxele.
What if your spouse refuses to disclose his/her pension or doesn’t cooperate?
According to Swanepoel, you may bring a court application to compel the spouse to make disclosure.
“If negotiations between the parties fail, the court can order a party to disclose information. A formal application to the court, with which an attorney would most likely have to assist, will have to be made in this regard,” he says.
How does the awarded amount affect the remainder of the spouse’s pension fund?
According to Swanepoel, if one party (non-member spouse) is awarded part of the other party’s (member’s) pension interest in a divorce order and the order meets the requirements of the Divorce Act (the order must be very carefully formulated to be enforceable against the relevant retirement fund), the retirement fund is obliged to make payment to the non-member spouse, when presented with the divorce order.
The member’s pension interest will be reduced by the amount paid to the non-member spouse and the balance will remain invested as before.
The non-member spouse will also be liable for income tax (if any) on the amount paid to him or her by the retirement fund.
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