Pension Funds and Divorces – The “clean break” principle

Until the 2007 amendment to the Pension Funds Act, if the court ordered one party a share of the other party’s pension fund, provident fund or retirement annuities, such pension payouts would only take place once that party died, resigned or retired. This principal was unfair.

Now, the retirement benefits accrue to the principal member of a fund on the date of divorce, whenever the divorce took place.
The Pension Funds Amendment Act, 2007 introduced the so called clean-break principle effective from 13th of September 2007, for the treatment of retirement fund benefits on divorce. In terms of section 37D(4)(d) of the Pension Funds Act 24 of 1956, you can now immediately claim your share of your ex-spouse’s Pension Fund, Provident Fund, Preservation Fund or Retirement Annuityas per the court order.
You can take your share in cash but will have to pay the tax on the benefit. Should you owe the receiver any amounts in lieu of outstanding taxes, SARS will deduct it from your claim. Once you have submitted your claim to the fund, the fund has 60 days to pay you your benefits.
You may prefer to transfer your share to your own:
  • Retirement Annuity Fund
  • Preservation Fund
  • Pension or Provident Fund
In order to transfer your benefit you must have a valid claim and the divorce order must state the following:
  • The percentage that you are entitled to
  • The name of the fund and/or
  • The reference number of the fund

 

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