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Refereed articles

The law regarding the division of the retirement savings of a retirement fund member on his or her divorce

The article analyses the recent amendments to the Pension Funds Act 24 of 1956 relating to the divorce benefit, particularly the amendment introduced by section 37D. This amendment will contribute positively to the development of South African retirement law. The allocation and payment of a share of a retirement fund member’s retirement savings on divorce has been the subject of intense debate, especially in view of the unfairness to non-member former spouses (who are usually women) in this regard before 1 November 2008.

In terms of section 7(8)(a)(i) of the Divorce Act 70 of 1979, the former spouse of a member on divorce could be awarded a portion of the benefits that the member would have received had he or she resigned on the date of the divorce. However, the former spouse was only entitled to receive that share when the member became entitled to a benefit in terms of the rules of the fund – that is, on his or her later retirement or termination of membership – which could have been many years after the divorce. By 1 November 2008 two pieces of legislation had been passed to clarify the position – the Pension Funds Amendment Act 11 of 2007 and the Financial Services Laws General Amendment Act 22 of 2008. Section 28(e) of the former stipulates that, for purposes of the Divorce Act, a benefit is deemed to accrue to the principal member on the date of divorce, thus allowing the non-member spouse to claim her share of it and have it transferred to another fund or paid to her within 60 days of the date of her election. The Financial Services Laws General Amendment Act further made it clear that the former spouses of members of retirement funds who had divorced those members before 13 September 2007, and to whom shares of the “pension interests” of those members were awarded on divorce, are entitled to claim them from the funds even if no benefits have yet accrued to the members they divorced.

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