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Family and Divorce law in South Africa - A Comprehensive Guide
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Financial Services Laws General Amendment Act changes: Living Annuities and divorce

6/21/2014

 
Financial Services Laws General Amendment Act changes: Living Annuities and divorce

Section 37D(1)(d) of the Pension Funds Act previously permitted for deductions (in terms of a divorce order as contemplated in section 7(8) of the Divorce Act) to be made from the member’s benefit or minimum individual reserve.

The section was recently amended by the Financial Services Laws General Amendment Act. As of 28 February 2014, Section 37D(1)(d) of the Pension Funds Act states that a registered fund may:

"deduct from a member’s or deferred pensioner’s benefit, member’s interest or minimum individual reserve, or the capital value of a pensioner’s pension after retirement, as the case may be – ”

What is the effect of the amendment?

The effect is that the deductions in section 37D in respect of maintenance and divorce orders as well as income tax have been extended to the "member’s interest and capital value of a pensioner’s pension after retirement”.

The question now really is whether "capital value of a pensioner’s pension after retirement" includes annuities purchased post-retirement, like an Investment-Linked Living Annuity (ILLA). If so, does this mean a non-member spouse may now claim from such annuities as part of a divorce order? The answer is no if regard is had to the below:

1. Pension Funds Act 24 of 1956

As a general rule a fund may only make a deduction from a member’s benefit if such a deduction is permitted in terms of the Pension Funds Act, the Income Tax Act and the Maintenance Act. This general rule however has exceptions as set out in section 37D.

Section 37D(1)(d)(i) now reads that a registered fund may deduct from "a member’s or deferred pensioner’s benefit, member’s interest or minimum individual reserve, or the capital value of a pensioner’s pension after retirement as the case may be) any amount assigned from such benefit or individual reserve to a non-member spouse in terms of a decree granted under section 7 (8) (a) of the Divorce Act, 1979 (Act No. 70 of 1979)”.

The key terms (underlined above) are defined in the Pension Funds Act as follows:

·         "Deferred pensioner” is defined as a member who has not yet retired but left the service of the employer concerned prior to normal retirement date leaving in the fund the member’s rights to such benefits as may be defined in the rules.

·         "Member” is defined as meaning, in relation to --

-       a fund referred to in paragraph (a) of the definition of "pension fund organisation”, any member or former member of the association by which such fund has been established;

-       a fund referred to in paragraph (b) of that definition, a person who belongs or belonged to a class of persons for whose benefit that fund has been established,

(a) but does not include any such member or former member or person who has received all the benefits which may be due to him from the fund and whose membership has thereafter been terminated in accordance with the rules of the fund;

·       "Pensioner” is defined as meaning a person who is in receipt of a pension paid from the fund.

Once a member retires and purchases a member owned annuity, he is no longer a member of the fund – he has effectively received all the benefits which may be due to him from the fund and his membership will thereafter be terminated in accordance with the rules of the fund.

Moreover, the words "the capital value of a pensioner’s pension after retirement” explicitly refers to "pensioner”, which in turn refers to the fund.

Even if you argue that this aims to include a pension paid by the fund (i.e. a fund owned annuity), where the fund still has commitments to the member, it would still not have any force or effect until the definition of "pension interest” in the Divorce Act is amended to include this.

It’s also interesting to note that section 37D(6) of the Pension Funds Act has been amended only to add the reference to "deferred pensioners”:

"(6) Despite paragraph (b) of the definition of "pension interest” in section 1 (1) of the Divorce Act, 1979 (Act 70 of 1979), the portion of the pension interest of a member or a deferred pensioner of a pension preservation fund or provident preservation fund, that is assigned to a non-member spouse, refers to the equivalent portion of the benefits to which that member would have been entitled in terms of the rules of the fund if his or her membership of the fund terminated, or the member or deferred pensioner retired on the date on which the decree was granted.”

2. Divorce Act 70 of 1979

Section 7(7) of the Divorce Act provides that a 'pension interest' (as defined in section 1) will be deemed to be a part of the assets at divorce:

"7) a) In the determination of the patrimonial benefits to which the parties to any divorce action may be entitled, the pension interest of a party shall, subject to paragraphs (b) and (c), be deemed to be part of his assets”

The wording of section 7(7) makes it clear that the non-member spouse is only permitted to a portion of the member spouse’s notional benefit if it qualifies as "pension interest” as defined.

"Pension interest” is defined in section 1 as referring to the benefits to which such member would have been entitled in terms of the rules of the fund if his membership of the fund would have been terminated on the date of the divorce on account of his resignation from his office, i.e. the member spouse must still hold a pension interest in the fund as at the date of divorce.

If a resignation benefit had already become payable to him before the divorce, he could not again be deemed to become entitled to a resignation benefit at the date of divorce. He would therefore no longer have a "pension interest” for the purposes of sections 7(7) and 7(8) of the Divorce Act read together with section 37D(4)(a) of the Pension Funds Act.

The Financial Services Law General Amendment Act has not made any amendments to the definition as quoted above and ccordingly, annuities purchased post-retirement remain excluded.

Conclusion

It might have been the intention of the legislature to close the "loophole” whereby someone can retire from a fund and purchase an annuity thereby effectively excluding it from the scope of section 7(7) and 7(8) of the Divorce Act. However, until the definition of "pension interest” in section 1 of the Divorce Act is accordingly amended, the changes will not affect annuities purchased upon retirement.

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  • Home
  • Divorce
    • The Reasons for Divorce
    • The Divorce Process in South Africa
    • Rule 41A Mediation
    • The Marital Property Regimes >
      • Marriage out of Community of Property, new case
      • Marriage in Community of Property
      • Marriage out of community without accrual >
        • Understanding Post-1984 Marriages
      • Marriage out of community with the inclusion of the accrual
      • Anti-Dissipation Interdicts Divorce
      • Universal Partnerships
      • Antenuptial Contracts
      • Register Antenuptial Contract Online
      • Changing your matrimonial regime.
      • Postnuptial Contracts
    • Division of Assets at Divorce >
      • Forfeiture of Assets in a Divorce
    • Evicting your spouse divorce
    • Retirement Funds and Divorce
    • Living Annuities
    • Hiding Assets in a Divorce
    • Trusts and Divorce >
      • Can I hide assets in Trust?
    • Divorce a Missing Spouse
    • Adultery and Suing a Third Party
    • Domicile in Divorce Cases
    • International Divorces in South Africa
    • Expat South African Divorce
    • International Jurisdiction
    • Spousal Visas
    • International Divorce Law >
      • UK Divorce Laws
    • Choosing a Divorce Attorney
    • On-line Divorce
    • Lawyer Fees and Costs
    • Important Aspects of a Divorce
    • Divorcing a Narcistic Spouse
    • Dealing with Emotions During Divorce and Separation
    • Divorce Statistics
    • Divorce Therapy and Counselling >
      • Marriage and Relationship Therapists
    • Rebuilding Your Financial Life
    • Divorce Attorney Cape Town
    • Ingredients of a successful relationship
    • What are the elements of a successful marriage?
    • Uncontested Divorce
    • Uncontested Divorce - What Happens on the Court Day?
  • Maintenance
    • Spousal maintenance
    • How to calculate Child Maintenance?
    • Maintenance Defaulters
    • What Happens if you don't pay child maintenance
    • Child Maintenance Frequently Asked Questions
    • Rule 43 Interim Maintenance Pending Divorce >
      • Can I appeal a Rule 43 Order
      • Apply for Costs in Rule 43
      • Financial Disclosure Rule 43
      • Rule 43 Maintenance
    • The Maintenance Manual
    • Grand Parents and Maintenance
    • Variation of Maintenance due to loss of employment
    • Contempt of Court Maintenance
  • Children
    • Section 28 of the Children's Act
    • Relocation and Child Abduction >
      • Frequently Asked Questions about Child Relocation
      • Child Relocation to New Zealand
    • The Hague Convention >
      • Child Participation in South African Family Law and the Hague Convention
      • International Child Custody Law South Africa
      • Hague Applications and Domestic Violence
      • Mirror Orders and the Hague Convention
      • Tips on international child custody
    • Unmarried Parents and the Law
    • Unmarried Fathers Rights
    • Parenting Plans >
      • Parenting Plan
      • Conflict and dispute-resolution mechanisms
    • The non-custodian parent and contact
    • Appointing a Guardian in a Will
    • Introducing a new partner to your child
    • Refusal of Contact
    • Suspending Parental Rights
    • The Law on Grandparents Rights over Children
    • Parental Alienation >
      • Alienating Children
      • Parental Alienation Imprisonment
      • What is the effect of Parental Alienation on children?
    • Living Arrangements
    • What effect does divorce have on children?
    • The Voice of the Child in Divorce
    • Facilitation
    • Joint decisions about your child
    • Paternity Disputes
    • The Family Advocate
    • Parenting during separartion
    • Children's Act 38 of 2005
  • Abuse
    • Domestic Violence Legislation and Case Law
    • The New Domestic Violence Act 14 of 2021
    • Gender Based Violence in South Africa
    • Domestic Abuse Forms
    • Evicting a Spouse
    • Being married to a Narcissist.
    • Divorcing an Abusive Spouse
    • What is Coercive Control?
    • What is Emotional Abuse
    • What is Sexual Abuse
    • What is Financial Abuse >
      • Economic Abuse
    • What is Stalking
    • What is Verbal Abuse
    • What is Spiritual Abuse
    • What is Social Abuse
    • Revenge Porn
    • Interdict Intimate photos
    • Steps to obtain a Protection Order
    • Domestic Violence eBook
    • The Protection Order
    • Who Qualifies for a Protection Order
    • Breaching a Protection Order
    • Questions on Domestic Abuse
    • Signs of an Abusive Relationship
    • Domestic Violence Information
    • Harassment >
      • Harassment Forms
  • Cohabitation
    • Universal Partnerships in South African Cohabitation
    • Maintenance and Cohabitation
    • Interim Maintenance and Cohabitation
    • Sample Cohabitation Agreement
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    • South Africa's New Marriage Bill: A Step Towards Equality and Inclusion
    • Same Sex
  • Family Law eBooks
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    • Court Rolls
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    • Family Law Blog
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    • Register for the Online Family Law Course
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  • Contact
  • Charities