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By Lize de la Harpe, 9 April 2014
We often come across divorce orders and/or settlement agreements which make provision for the allocation of interest/growth on pension interest. Such orders would typically read as follows:
“The Plaintiff’s said one-half share in the aforesaid Pension Fund
shall bear interest at the rate of 10% per annum from the date of divorce to the date of payment”.
Unfortunately, such orders are not enforceable against the fund in question. The reason therefore lies in the applicable legislation, namely the Pension Funds Act 24 of 1956 and the Divorce Act 70 of 1979.
Section 37A of the Pension Funds Act (“PFA”) specifically limits the circumstances for the lawful deduction of an amount from a member’s pension benefit. As a general rule a fund may only make a deduction from a member’s benefit if such a deduction is allowed in terms of the Pension Funds Act, the Income Tax Act or the Maintenance Act.
Section 37D(1)(d) of the PFA 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 – (i) 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) or in terms of any order made by a court in respect of the division of assets of a marriage under Islamic law pursuant to its dissolution;...”.
Furthermore, in terms of section 37D(4)(c)(ii) of the PFA “accrual of fund return” will be payable to a non-member spouse upon the expiry of 120 days after the fund has requested the non-member spouse to make an election as to how he/she wants payment of the pension interest to be made.
The section reads as follows:
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. In terms of section 7(8) of the said act a court may order that a portion of the “pension interest” of a member of a fund be awarded to the spouse of such member. Section 7(8) reads as follows:
“(8) Notwithstanding the provisions of any other law or of the rules of any pension fund -
The definition of
“pension interest” as referred to in section 1 of the Divorce Act sets out how the
pension interest of a member’s pension is valued. The Divorce Act defines “pension interest” as follows –
It is clear from the definition that “pension interest” does not include any interest or fund returns that accrue to a member spouse after the date of divorce.
The definition of
“pension interest” as set out in section 1 of the Divorce Act (quoted above) does not include any interest or growth which may accumulate after the date of divorce. Furthermore, the PFA makes it clear that the said act does not make provision for the payment of fund interest after the date of divorce.
In the Supreme Court of Appeal matter of
Old Mutual Life Assurance Company (South Africa) Limited and another v Swemmer 2004(5) SA373 (SCA) the court held:
In the recent matter of
D T Beytell v Old Mutual Staff Retirement Fund and Old Mutual Life Assurance Company (S.A.) Ltd the complainant wanted the first respondent to pay interest at the rate of 15.5% per annum on the former spouse’s pension interest from the date of divorce to the date of transfer. The Pension Funds Adjudicator held that no provision was made in the Divorce Act for payment of interest and it is therefore not permitted by any legislative provision. The complaint was accordingly dismissed.