There is an increasing number of matters that come before the courts where spouse\u2019s who
are members of a pension fund (\u201cmember spouse\u201d) and married in community of property exit
their pension funds when divorce proceedings are instituted against them. The non member
spouse is deprived of their 50% interest in the member spouse\u2019s pension benefit. We briefly
look at the these cases, the applicable legislation and possible changes to the legislation.<\/p>\n
The courts handed down two interesting judgments earlier this year. In the matters of C.C. N
v N.N (2021\/11607) (2023) ZAGPHC 208 and S v S and Others (19424\/2021)
(2022) ZAGPPHC 113, the court had to decide on the non member spouse\u2019s endeavours to
get their share of the member spouse\u2019s pension interest on divorce.<\/p>\n
The Divorce Act, 1979 and the Pension Fund Amendment Act, 2007 are the legislation
applicable to pension fund interest on divorce. Section 7 (7) of the Divorce Act 1979, provides
that:<\/p>\n
(a) In the determination of the matrimonial 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.<\/p>\n
(b) The amount so deemed to be part of a party\u2019s assets, shall be reduced by any amount of
his pension interest which, by virtue of paragraph (a), in a previous divorce\u2014<\/p>\n
(i) was paid over or awarded to another party; or
(ii) for the purposes of an agreement contemplated in subsection (1), was accounted in favour
of another party.<\/p>\n
(c) Paragraph (a) shall not apply to a divorce action in respect of a marriage out of community
of property entered into on or after 1 November 1984 in terms of an antenuptial contract by
which community of property, community of profit and loss and the accrual system are
excluded.\u201d<\/p>\n
Section 7 (8) provides that:<\/p>\n
\u201cNotwithstanding the provisions of any other law or of the rules of any pension fund\u2014<\/p>\n
(a) the court granting a decree of divorce in respect of a member of such a fund, may make
an order that\u2014<\/p>\n
(i) any part of the pension interest of that member which, by virtue of subsection (7), is due or
assigned to the other party to the divorce action concerned, shall be paid by that fund to that
other party when any pension benefits accrue in respect of that member;\u201d<\/p>\n
Section 37(D)(4)(a) of the Pension Funds Amendment Act, 1956 states that:<\/p>\n
\u201c(4) (a) For purposes of section 7 (8) (a) of the Divorce Act, 1979 (Act No. 70 of 1979), the
portion of the pension interest assigned to the non-member spouse in terms of a decree of
divorce or decree for the dissolution of a customary marriage is deemed to accrue to the
member on the date on which the decree of divorce or decree for the dissolution of a
customary marriage is granted, and, on the written submission of the court order by the non
member spouse-<\/p>\n
(i) must deducted by-<\/p>\n
(aa) the pension fund or pension funds named in or identifiable from the decree;
(bb) the pension fund or pension funds to which the pension fund referred to in item (aa)
transferred the pension interest referred to in the decree;<\/p>\n
(ii) must be deducted on the date on which an election is made or, if no election is made within
the period referred to in paragraph (b) (ii), the date on which that period expires;
(iii) must reduce the member\u2019s accrued benefits or minimum individual reserve at the date of
the divorce.\u201d<\/p>\n
In C.C.N v N.N, the court stated that \u201cThis case raises an important social issue regarding
fund members who exit their funds when they are embroiled in divorce proceedings.
Particularly when these members cash their benefits or instruct their funds to purchase
annuities for them using their entitled share of such benefits on divorce.\u201d<\/p>\n
In this matter, the applicant and respondent had entered into a divorce settlement agreement
and made the settlement agreement an order of court. The court order stated that the applicant
was entitled to 50% of the respondent\u2019s pension benefit. When the settlement agreement was
made an order of court, the applicant was unaware that the respondent had resigned from his
employment and was no longer a member of his employer\u2019s pension fund. The applicant
submitted the court order to the pension fund administrator. When the pension fund received
the court order, it advised the applicant to change the wording of the court order to state that
the applicant is entitled to 50% of the respondent\u2019s accrued benefit.<\/p>\n
The applicant approached the court to have the court order changed to reflect 50% of the
accrued benefit instead of 50% of the pension interest because pension fund had already paid
the pension interest to the respondent. The court found that the applicable legislation does not
provide for accrued benefit and the applicant was unsuccessful in her application.<\/p>\n
A pension fund member holds an interest in the fund. The interest accrues as a benefit once
it becomes due to the member spouse. Once the benefit has accrued, the non member spouse
cannot claim the interest as it is no longer an interest but an accrued benefit. There is no
provision for a non member spouse to claim their 50% interest once the benefit has accrued.
And, the pension interest does not form a part of the joint estate and does not automatically
fall to be divided as an asset of the joint estate until, in the case of a divorce, the court grants
an order that the interest must be divided between the former spouse\u2019s on divorce, in terms of
the applicable legislation.<\/p>\n
In S v S and Others, the applicant brought an interlocutory urgent application for an order to
stop the Government Employee\u2019s Pension Fund (\u201cFund\u201d) from paying the respondent the
entire pension fund interest alternatively that the Fund pays 50% of the respondent\u2019s pension
interest into an account nominated by the applicant. The respondent instituted divorce
proceedings in July 2020 and resigned from his employment effective 30 June 2021, before
the finalisation of the divorce proceedings. The respondent would receive his pension interest
before the finalisation of the divorce, depriving the applicant of her 50% interest in the
respondent\u2019s pension interest.<\/p>\n
The court found that the applicant had satisfied the requirements of an interdict:<\/p>\n
\u2022 The applicant had a clear right to the 50% pension interest that she claimed. There
was a well grounded fear of irreparable harm because the respondent had claimed
forfeiture of benefits in his papers. The respondent then resigned from his employment,
which evidenced that the respondent did not want the applicant to share his pension
interest,<\/p>\n
\u2022 There was no alternative remedy because once the interest accrued and was paid, the
applicant would not be able to recover her 50% interest,<\/p>\n
\u2022 The applicant brought the application for an interdict a few months before the
respondent\u2019s intended retirement. Therefore, there was no urgency but, the lack of
urgency was not fatal because the applicant proved irreparable harm.<\/p>\n
\u2022 The court found that it would be equitable for the fund to pay the respondent 50% of
his pension interest and hold over 50% until the finalisation of the divorce proceedings,
preserving the applicant\u2019s 50% non member interest.<\/p>\n
This growing trend of member spouse\u2019s depriving non member spouse\u2019s of their 50% pension
benefit is a challenge. Attorneys and clients usually only become aware of the member
resignations when submitting court orders for payment of the non members 50% interest, once
the proverbial horse has bolted. At this stage, the pension interest has already been paid to
the member spouse who resigned.<\/p>\n
As the pension interest does not form part of the joint estate, there is no requirement for no
member spouse\u2019s to be informed of a member spouse\u2019s resignation and payments. In the
matter of C.C. N v N.N, the judge referred to the possible need for legislative changes to assist
non member spouse\u2019s from being deprived of their 50% interest in the member spouse\u2019s
pension fund benefits \u201cThere is no adequate framework that allows non member spouse\u2019s to
claim portions of these benefits directly from the funds when member spouse\u2019s exit their funds
before divorce. This has allowed member spouse\u2019s, as is the case in this matter, to resign
after being served with divorce summons to ensure that they keep these benefits out of reach
of their non member spouse\u2019s. This is a serious concern that the legislature is yet to address.\u201d<\/p>\n
Non member spouse\u2019s who are married in community of property are entitled to a share in the
member spouse\u2019s pension interest as set out in legislation. There is a gap in the law that allows
member spouse\u2019s to obviate the consequences of their marital regimes. This leaves non
member spouse\u2019s having to be creative to prevent member spouse\u2019s from excluding them
from receiving their share of the pension benefit. This is unfair to the non member spouse
because they are entitled to the 50% interest and their attempts to recover the funds due to
them is expensive and time consuming.<\/p>\n
Legislative changes are required to close this gap that some non member spouse\u2019s use to
avoid the natural consequences of their marital regimes. The legislative changes to protect
non member spouse\u2019s are discussed in M C Marumoagae\u2019s article \u201cA critical discussion of a
pension interest as an asset in the joint estate of parties married in community of property\u201d
(2014) 1 Speculum Juris 54. Marumoagae proposes that the necessary legislative reforms
should recognise a member spouse\u2019s pension interest as forming a part of the joint estate
when a member spouse is married in community of property.<\/p>\n
The current position is that the member spouse\u2019s pension interest is regarded being a part of the member spouse\u2019s estate and separate from the joint estate. A pension interest and benefit should be regarded as a patrimonial benefit. I agree with this view. The consequences of a marriage in community of property is that all the assets are pooled together and are divided equally on divorce, if there is no settlement agreements. To include the pension interest as a part of the member spouse\u2019s joint estate from the date of the member spouse joining the pension fund. When a member spouse resigns, the pension fund will be alerted to not pay the member spouse the full benefit until it has been furnished with a divorce court order setting out what should happen to the pension interest.<\/p>\n\n\n