A valid divorce order is granted for the payment of R 600,000 to the non-member spouse
Impact of the Pension Funds Amendment Bill on Divorce Matters
Certain of the divorce-related changes in the Pension Funds Amendment Bill (‘PFAB’) have been approved by Parliament. The PFAB was signed by the President on 21 July 2024 and is now law.
On 26 March 2024, Treasury addressed the possible contradictions between the Pension Funds Act and the Divorce Act. Its view was that the Pension Funds Act (PFA) would apply whenever there was a conflict between the Divorce Act and the PFA, which both contain provisions dealing with pension interest and laws that pension funds would ultimately have to apply.
The Current Position
Divorce orders that are enforceable against retirement funds must comply with the definition of ‘pension interest’ in the Divorce Act to allow for a share of a member’s benefit to be paid to a non-member spouse.
The Divorce Act defines ‘pension interest’ as follows:
‘pension interest’ in relation to a party to a divorce action who – (a) is a member of a pension fund (excluding a retirement annuity fund), means the benefits to which that party as such a member would have been entitled in terms of the rules of that 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.
This definition allows for a divorce order to be enforceable against the fund where the date of divorce is before the member leaves the fund. The member must still be entitled to a resignation benefit from the fund.
The Position under the PFAB
A new definition of ‘pension interest’ has been included in the PFAB, which provides that:
‘pension interest’, in relation to a court order granted under section 7(8)(a)of the Divorce Act or a court order granted in respect of the division of assets of a marriage according to the tenets of a religion, means, in relation to a party who is a member of a fund, that member’s individual account or minimum individual reserve, as the case may be, determined in terms of the rules of that fund, on the date of the court order.
This definition proposes the pension interest to be the member’s share of the value of the fund, determined in terms of the rules of that fund, on the date of the court order.
This means that, regardless of the membership status, if a member has a benefit in the fund, the divorce order can be enforced. This includes active, unpaid and preserved members, as well as deferred retirees and pensioners.
The different definitions of ‘pension interest’
Concerns were raised about the two definitions of pension interest, one in the Divorce Act and one in the PFAB because retirement funds would now have to decide which definition takes precedence.
As a result of these concerns, a further clause was inserted into the PFAB which says:
In the event of a conflict between the provisions of this Act and the Divorce Act, the provisions of this Act prevail.
Despite the insertion of the above provision, funds are still left with two conflicting definitions of ‘pension interest’. As things currently stand, funds will have to rely on the above provision in giving effect to divorce orders that meet the requirements of the definition of ‘pension interest’ in the PFAB.
How will divorce payments be deducted from the various components?
From 1 September 2024 onwards, members may have the pots below in the fund.
- a vested pot
- a retirement pot
- a savings pot
For enforceable divorce orders granted on or after 1 September 2024, this means that each of the member’s pots will proportionally reduce in value. Take, as an example, the following scenario:
Take, as an example, the following scenario:
Member’s current values
- Vested pot R700 000
- Savings pot R200 000
- Retirement pot R300 000
Values after payment of divorce claim
- Vested pot R350 000
- Savings pot R100 000
- Retirement pot R150 000
How will it impact on Defined Benefit Funds?
Deductions from pensionable service will be made for any reduction in any of the pots to cater for a divorce order. This means that the components are not proportionally reduced by a Rand amount, but the pensionable service in the components will be reduced.
Impact on savings withdrawal benefits
At any time prior to retirement, members will be entitled to access a withdrawal of up to 100% of the amount that has been accumulated in the savings component. This “savings withdrawal benefit” (SWB) will be limited to one withdrawal per tax year. The maximum amount available for a SWB will be the amount that has accumulated in the savings component (contributions plus growth, less any costs) at the date of the withdrawal.
Where a member is getting divorced, this will limit that member’s claim to a SWB.
Once a divorce claim is received by the fund administrator, the administrator should establish whether there is any divorce order, final or pending, logged on the member’s record.
- If there is no divorce order loaded on the member’s record, then the fund’s administrator will continue with the SWB claim;
- If there is a valid final divorce order logged, the administrator will settle that divorce order from the member’s fund credit and then pay the member a SWB based on what is left after settling the divorce order.
- If there is a pending (unfinalised) divorce order, then the administrator must –
- pend the claim for a SWB;
- get consent from the non-member spouse for a SWB claim to continue (if the consent form is received and non-member spouse does not give consent then the SWB request must be denied);
- if the non-member spouse gives consent, process the SWB claim to the member.
The prohibition on paying out a SWB will apply until finalisation of the divorce or until a court order is issued.
Effect on withdrawal on retirement benefits
All resignation, dismissal, retrenchment or retirement benefits must be paid to members where there is no divorce order in place, unless the fund receives an interdict, stopping them from paying out the benefit.
Once the fund receives a valid divorce order, payment to the non-member spouse will be settled by reducing each component (pot) proportionately and any balance left in the fund will be subject to the fund’s existing rules on exit or retirement.
In-fund pensioners
The PFAB says that any deduction to be made in respect of a pensioner for a divorce order must be made from the capital value of the pensioner’s pension after retirement.
The impact and correct interpretation of this provision is unclear and will have to be clarified for funds that have in-fund pensions.
Summary of the new provisions
- The PFAB definition of ‘pension interest’ extends enforceable divorce orders to benefits in the fund after leaving service.
- The deduction of an amount payable in terms of a valid divorce order will reduce each of the vested, retirement and savings components (pots) proportionately.
- If there is a pending divorce, the non-member spouse must consent to the member claiming a SWB.
COOKIE POLICY
Welcome to our website.
1. Introduction
This Cookie Policy explains how we use cookies and similar technologies on our website axioconsult.com. This policy is designed to help you understand what cookies are, how we use them, and the choices you have regarding their use.
2. What Are Cookies
Cookies are small text files that are stored on your device (computer, tablet, or mobile phone) when you visit certain websites. They are widely used to enhance your online experience by remembering your preferences and actions over time. Cookies are not harmful and do not contain personal information like your name or payment details.
3. How We Use Cookies
We use cookies for various purposes, including:
- Essential Cookies: These cookies are necessary for the basic functioning of our website. They enable you to navigate our site, use its features, and access secure areas.
- Analytical/Performance Cookies: These cookies help us understand how visitors use our website. They provide information about which pages are visited most frequently, how long visitors stay on each page, and whether they encounter any error messages. This data helps us improve the performance and usability of our website.
- Functionality Cookies: These cookies allow our website to remember choices you make (such as your username, language, or region) and provide enhanced, personalised features.
- Targeting/Advertising Cookies: These cookies are used to deliver advertisements that are relevant to your interests. They may also limit the number of times you see an ad and help measure the effectiveness of ad campaigns.
4. Your Cookie Choices
You have the option to manage your cookie preferences. You can usually modify your browser settings to accept, reject, or delete cookies. Please note that if you choose to block or delete cookies, some features of our website may not function properly.
5. Third-Party Cookies
We may allow third-party service providers to use cookies on our website for the purposes outlined in Section 3. These providers may also collect information about your online activities over time and across different websites.
6. Updates to This Policy
We may update this Cookie Policy from time to time to reflect changes in technology, law, or our data practices. Any changes will become effective when we post the revised policy on our website.
7. Contact Us
If you have any questions about our Cookie Policy or how we use cookies on our website, please contact us at
By continuing to use our website, you consent to the use of cookies as described in this Cookie Policy.