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No more pension “debt” on divorce

Jun 24, 2019

The long-awaited amendment to the Government Employees Pension Law dealing with divorce debt has been signed into law.

Government Employees Pension LawWith very little fanfare, a very important piece of legislation was put into effect regarding the calculation of divorce benefits for members of the Government Employee Pension Fund (GEPF).

The long-awaited amendment will remove the “pension debt” that is accrued when a member pays out a portion of their pension benefit to their former spouse on divorce. The clean break principle applies where a divorce agreement allows for the non-member spouse to receive a portion of the member’s pension fund. Currently, the way the pension withdrawal is calculated uses the concept of debt and interest in the apportionment of pension benefits on divorce. This means that members effectively have a “debt” owing on their pension fund.

This created a situation where members could find themselves owing money to GEPF on their retirement. This happened to a City Press reader who divorced in 2012 after the introduction of the clean break principle. After 41 years of service he would owe well over R2 million to the fund. This included the original payment to his spouse of R1.3 million, plus interest that is charge on this ‘debt’. As he wrote in his letter to City Press, “My total pension is only worth R1.4 million. That would leave me in debt to the sum of over R700 000 and my only ‘crime’ was to get divorced.”

The amendment to the Government Employees Pension (GEP) Law now means that rather than creating a debt, there is an adjustment to the member’s service following payment of a divorce settlement by the fund. According to the amended section 24A of the GEP Law, “the benefit that is subsequently payable to the member shall, as provided in the rules, be decreased by reducing the member’s years of pensionable service to take into account the pension interest of the member which was assigned to any former spouse of the member.”

The amendment also allows for members who have already paid out pension benefits to their former spouse to opt for the new calculation. Affected members have 12 months from the commencement of the amendment (23 May 2019) to notify the Fund whether they wish to remain with the previous calculation in terms of the divorce debt, or change to the new calculation where there would be a reduction in service. If the member does not notify the fund, the new rules will apply. A member may also select to buy back those years of service by either paying in immediately or increasing their monthly contributions.

According to a GEPF spokesperson, the gazetting of the rule and law amendment will happen in July and come into effect from 1 August 2019. All divorced employees will be contacted and will be provided with a calculation explaining the two options to help them make an informed decision. Affected employees have until 22 May 2020 to make a decision, after which the new calculation will apply.

This article first appeared in City Press.

26 Comments

  1. Some affected members don’t have email and don’t have access to information. How are they going to be assisted because this information arrived late.

    Reply
  2. Maya, if one opts to resign, are there benefits to opting for a reduction of service instead of just letting the debt be deducted from the resignation benefit?

    Reply
    • A resignation benefit works on value not years of service – so you would need to find out from GPAA

      Reply
  3. I have paid back my pension debt in 2017 and got a reminder now for the choice form, although I havent received the form. I also received an sms saying I haven’t made the choice. I actually don’t have to chose debt or reduced service, since I have settled my debt in full. What should I do? Whom should I contact? How do I get a form to indicate I have paid back with interest what my ex husband has received?

    Reply
  4. Obviously there are some detailed calculations to be made. Can you perhaps refer a actuary that can assist with that or even a few examples how to do the calculation?

    Reply
    • It is one of those topics I really want to tackle – when I have a chance… apparently Solidarity union is investigating

      Reply
  5. Good day. My divorce went through on the 13/12/2019 in the court. I got 30 years service and need to pay her half of my pension. Can you please explain to me how this will work now with my pension. My pension are now R3mill. and after the settlement R1.5.
    Thanks

    Reply
    • Your HR manager would be best to explain your personal circumstance but my understanding is that the value of R1.5 million is your resignation value, but if you work until retirement your payout is based on years of service. So that would be reduced – possibly by 15 years. But you need to confirm this

      Reply
  6. Hi Maya,
    My husband of 14yrs received his pension lumpsum in 2016 and now receiving monthly pay from the GEPF we are going through a divorce and i need to know if i can still claim from the GEPF, as i think there is still funds he is receiving monthly.

    Reply
    • You could have a claim on the lump sum as that forms part of the estate (assuming you are married COP). You would only have a maintenance claim on his monthly pension.

      Reply
  7. What happens to a member’s intetest that has paid the divorce settlement and has gone on pension March 2019.

    Reply
    • According to the GEPF “If a member has already exited, it means we would have deducted the divorce debt already from their pension, meaning he/she doesn’t owe the GEPF anymore. There is no recalculation, because essentially, the new amendment allows members who are still in service to reduce their years pf service OR remain on the current debt model”

      Reply
  8. When will the information referred to in the responses above be sent to affected members

    Reply
    • I was just told that affected members will be notified. Maybe check with HR

      Reply
  9. By the new rule, does it mean the number of years will be reduced to half automatically if the affected member does not contact GEPF by May 2020?

    Reply
    • The exact number of years of reduction would need to be calculated, but yes if you do not select otherwise your number of years will be reduced rather than building up a debt

      Reply
    • What then happens to the already accumulated interest on the divorce debt?

      Reply
      • i think it is replaced with reduced service. You will need to speak to your HR

        Reply
  10. Thank you for the pension article it was my worry

    Reply
    • We have received many queries from readers who are affected as to how their pensions will now be affected. According to communication sent by the GEPF, the gazetting of the rule and law amendment will happen in July and come into effect from 1 August 2019. All divorced employees will be approached and be provided with a calculation explaining the two options in order for those affected employees to make an informed decision. Those employees have 12 months to specify their choice from the date the President signed the amendment into law. If employees did not opt for their choice by 22 May 2020, then the new amendment will be applicable to them.

      Reply
  11. Maya I have divorced and the former spouse got the pension she deserved however this amendment doesn’t sit with me well may you please email for information about all this so that I can make my well informed decision.

    Reply
    • We have received many queries from readers who are affected as to how their pensions will now be affected. According to communication sent by the GEPF, the gazetting of the rule and law amendment will happen in July and come into effect from 1 August 2019. All divorced employees will be approached and be provided with a calculation explaining the two options in order for those affected employees to make an informed decision. Those employees have 12 months to specify their choice from the date the President signed the amendment into law. If employees did not opt for their choice by 22 May 2020, then the new amendment will be applicable to them.

      Reply
  12. Miya I have divorced and the former spouse got the pension she deserved however this amendment doesn’t sit with me well may you please email for information about all this so that I can make my well informed decision.

    Reply
    • The GEPF will be sending out the information to all affected members

      Reply

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Maya Fisher-French author of Money Questions Answered

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