Pension Law Update – What if the Divorce Order Doesn’t Mention Pension Interest?

By Kara Barnard, Associate in the Employment & Pension Law department

What happens when the court that grants a decree of divorce to a couple who were married in community of property, does not make a specific order declaring that the pension interest is to form part of the joint estate? Until the Supreme Court of Appeal ruled on this in the recent decision of Ndaba v Nbada [2016] ZASCA 162 (4), there were conflicting decisions about whether and how the non-member spouse could claim payment from the fund.

The position in law is clear – pension interest is deemed to be part of the joint estate for the limited purposes of determining the patrimonial benefits to which the parties are entitled as at the date of their divorce (a specific order in terms of Section 7(7) of the Divorce Act is not required).

What the court had to assess in the Ndaba case is the position of a non-member spouse after the dissolution of the marriage where the divorce court did not award him or her a share of the member spouse's pension interest in terms of Section 7(8) of the Divorce Act.

An order in terms of section 7(8) of the Divorce Act is required to enable the non-member spouse to claim payment of his or her portion of the pension interest at the date of divorce directly from the retirement fund of the member spouse. The fund is required, in terms of Section 37D(1)(d)(i) of the Pension Funds Act, 1956 to effect direct payment to the non-member spouse and in the absence of an order in terms of Section 7(8) the Divorce Act, the Fund cannot make payment of any portion to the non-member spouse.

The Supreme Court of Appeal has now confirmed the position that a non-member spouse does not lose the right to claim their share of pension interest of the member spouse, despite the divorce court not making an order in terms of Section 7(8) of the Divorce Act. If the non-member spouse seeks to claim a share of pension interest, the non-member spouse is required to seek an amendment to the decree of divorce of the settlement agreement before requesting payment from the Fund.

Retirement Funds should ensure that each decree of divorce or settlement agreement that is received complies with the provisions of Section 7(8) as it is only then that the Fund is required to effect payment to the non-member spouse. Should the order not comply with these provisions, the Fund is to request the non-member spouse to seek an amendment to the decree of divorce, as they are now able to do so post divorce proceedings.

For more information on the above contact:

Kara Barnard

Associate in the Employment & Pension Law department

+27 79 503 6144