The claim for pension interests is undoubtedly one of the most sizeable claims that a spouse, married in community of property, can make against the joint estate shared between themselves and their estranged partner. Pension funds though, have proved resolute in refusing to pay pension interests to a non-member spouse unless strict requirements are adhered to.
Any settlement agreement reached between parties in the process of a divorce invariably contains a provision for the payment of pension interests to the non-member spouse. These provisions, although binding inter-partes, must be very specifically worded in order to be binding on a pension fund.
The draconian approach adopted by pension funds in this regard is understandable when one considers the following:
Section 37A of the Pension Funds Act, 24 of 1956 (“the Act”) states that:
“37A. Pension benefits not reducible, transferable or executable:
(1) Save to the extent permitted by this Act, the Income Tax Act, 1962 (Act No. 58 of 1962), and the Maintenance Act, 1998, no benefit provided for in the rules of a registered fund (including an annuity purchased or to be purchased by the said fund from an insurer for a member), or right to such benefit, or right in respect of contributions made by or on behalf of a member, shall, notwithstanding anything to the contrary contained in the rules of such a fund, be capable of being reduced, transferred or otherwise ceded, or of being pledged or hypothecated, or be liable to be attached or subjected to any form of execution under a judgment or order of a court of law, or to the extent of not more than three thousand rand per annum, be capable of being taken into account in a determination of a judgment debtor’s financial position in terms of section 65 of the Magistrates’ Courts Act, 1944 (Act No. 32 of 1944), and in the event of the member or beneficiary concerned attempting to transfer or otherwise cede, or to pledge or hypothecate, such benefit or right, the fund concerned may withhold or suspend payment thereof: Provided that the fund may pay any such benefit or any benefit in pursuance of such contributions, or part thereof to any one or more of the dependants of the member or beneficiary or to a guardian or trustee for the benefit of such dependant or dependants during such period as it may determine.”
Section 37D of the Act, read with section 7 of the Divorce Act, 70 of 1979, provides for an exception to the above. The relevant portions of the respective sections stating as follows:
“37D. Fund may make certain deductions from pension benefits: A registered fund may:
… (c) deduct any amount which the fund has paid or will pay by arrangement with, and on behalf of, a member or beneficiary in respect of:
… (iii) any purpose approved by the registrar, on the conditions determined by him, upon a request in writing from the fund, from the benefit to which the member or beneficiary is entitled in terms of the rules of the fund, and pay such amount, if due, to such medical scheme, insurer or person concerned, as the case may be.”
“7 Division of assets and maintenance of parties: … 7(a) In the determination of the patrimonial 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. (b) The amount so deemed to be part of a party’s assets shall be reduced by any amount of his pension interest which, by virtue of paragraph (a), in a previous divorce – (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.
… (8) Notwithstanding the provisions of any other law or the rules of any pension fund- (a) the court granting a decree of divorce in respect of a member of such a fund, may make an order that- (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; (ii) the registrar of the court in question forthwith notify the fund concerned that an endorsement be made in the records of that fund that that part of the pension interest concerned is so payable to that other party and that the administrator of the pension fund furnish proof of such endorsement to the registrar, in writing, within one month of receipt of such notification; (b) any law which applies in relation to the reduction, assignment, transfer, cession, pledge, hypothecation, or attachment of the pension benefits, or any right in respect thereof, in that fund, shall apply mutatis mutandis with regard to the right of that other party in respect of that part of the pension interest concerned.”
The austerity of these provisions have, on innumerable occasions, been amplified by our courts.
For instance, in the case of Eskom Pension and Provident Fund v Krugel & Another 2012 (6) SA 143 SCA, the court held that a pension fund’s right to make deductions from a pension benefit is highly circumscribed and may be exercised only as expressly provided by section 37A and section 37D of the Pension Funds Act.
In the case of Rampa v Sentinel Mining Industry Retirement Fund  1 BPLR 106 (PFA), the Pension Funds Adjudicator expressed that a court order made in terms of the Pension Funds Act read with the relevant sections of the Divorce Act would only be enforceable against a fund if it, at the very least: specifies that a defined percentage of the member spouse’s pension interest as at date of divorce is assigned to the non-member spouse; and expressly orders the relevant fund to pay the assigned portion of pension interest to the non-member spouse when pension benefits accrue to the member spouse; and orders the Registrar of the Court to notify the relevant fund to endorse its records to the effect that the specified portion of pension interest is payable to the non-member spouse and that the administrator of the find furnish the Registrar with proof thereof.
This point has been elaborated even further.
In Saunders v Eskom Pension and Provident Fund  2 BPLR 257 (PFA) the Pension Funds Adjudicator expressed that an order should state the following in order to be binding on a pension fund: the correct name of the fund; a specified portion of pension interest; specifically order the fund to make payment of the specified pension interest to the non-member spouse when such benefit accrues to the member; that the fund be ordered to endorse its records.
In considering the applicable legislation, and being mindful of how the Courts and the Pension Funds Adjudicator have interpreted and applied that legislation, it is evident that any order and consequent deduction in conflict with the provisions of section 7 of the Divorce Act would undoubtedly amount to a reduction in contravention of section 37A of the Pension Funds Act.
It is worthwhile then, to ensure that any settlement agreement / court order be meticulously phrased so as to avoid varying interpretations and the subsequent refusal of a fund to comply therewith.
For more information and assistance contact the Author, Simon Andrew Tyson on firstname.lastname@example.org