Russell Anderson, consulting senior policy advisor at the Association for Savings and Investment South Africa (ASISA), says if you are a woman facing divorce, it is critical that you ensure that the wording of your final divorce order does not fail you when it comes to the sharing of retirement fund benefits.

Women who have dedicated their lives to raising families, running households and supporting their husbands in advancing their careers, often draw the short straw financially when their marriages end in divorce. And those who do not have their own savings may face a grim retirement unless they get to share in their ex-spouses’ retirement benefits.

ASISA member companies are increasingly dealing with divorce orders that cannot be given effect to. Often the wording is simply too vague and does not comply with the laws governing retirement fund benefits and the provisions in the Divorce Act that deal with them.

It is therefore extremely important that when getting a divorce, you consult a lawyer with the necessary experience and knowledge of the complex laws governing retirement fund benefits.

For example, the term ‘pension interest’ – the portion of your spouse’s retirement benefit that you are entitled to on divorce – is given a specific meaning in our legislation; the meaning differs depending on whether it’s a preservation, pension or provident fund, or a retirement annuity.

Determining your share

If you’re in the process of getting divorced, it’s very important that you understand what you may be entitled to in respect of your ex-spouse’s retirement fund benefits. Retirement fund benefits include the benefits in a pension, provident, preservation and retirement annuity (RA) fund.

A court granting an order of divorce may make an order regarding the division of your assets. Your spouse’s pension interest in the retirement funds of which he is a member will form part of his assets if you are married in community of property, or out of community but subject to the accrual system. This means that on divorce, you may be entitled to a share of your spouse’s pension interest.

The amount or percentage of the pension interest awarded to you needs to be agreed to and may be set out in the divorce order or settlement agreement which must be incorporated in the final divorce order. Where there is no settlement agreement, the court can be requested to make an order. The amount awarded can range from 0% up to 100% of the pension interest. Previous divorce pension interest awards not yet paid will, however, have to be considered first.

Also, benefits that have already become due and payable (accrued) before the date of divorce cannot be included. An example would be where the member has resigned or retired from the retirement fund and the benefit has become due and payable by the fund before the date of divorce.

You need to know, however, that the party who is receiving the portion of the pension interest is liable for any tax that needs to be paid on that amount. So if you are stipulating a Rand value, be sure to take the tax into account when agreeing on a fixed amount.

Insist on proper wording

Unless the final divorce order is correctly worded and the proper legal process is followed, you run the risk of your spouse’s retirement fund not being able to pay you the pension interest that was awarded to you. If this has happened to you, unfortunately you have little choice but to return to court for a new – and better worded – final divorce order.

The following elements are essential:

• The divorce order must be issued by a High Court, Regional Court or Divorce Court.
• The retirement fund member must still be a member of the fund at the date on which the divorce order is granted.
• The marriage or relationship that ended must be one that can be dissolved in terms of the Divorce Act.
• The fund or funds against which the claim is made must be correctly named in the final divorce order.
• The order must properly assign a Rand value or percentage of the pension interest, as at date of divorce, to the non-member spouse (the party who is not a member of the fund). Reference must be made to “pension interest”. Phrases such as “pension benefit”, “pension fund”, “value”, “benefits”, “fund interest” or “interest in the fund” must be avoided at all costs because, as mentioned above, “pension interest” has a specific meaning in law and is the correct term.
• The fund, and not the member spouse, must be ordered to make payment to the non-member spouse (it is not sufficient for an order only to state that an endorsement must be made in the records of the fund).

A guideline for divorce lawyers can be downloaded from the ASISA website.

Post divorce

Once the final divorce order is granted, and provided that it is binding on the fund, as the non-member spouse you can choose to:

• Take the amount awarded in cash, subject to tax determined by the Receiver of Revenue; or
• Transfer the amount awarded to another approved retirement fund tax free (excluding a transfer from a pension fund to a provident fund).