Getting Divorced? Ensure Court Order to Pension Fund Is Correctly Worded

On divorce, a couple’s assets are divided according to their marital property regime unless a divorce settlement agreement, drawn up with the consent of both parties, specifies a different arrangement. 

Under each marital property regime the consequences are as follows: 

• In community of property: all property within the joint estate is divided 50-50. 

• Out of community of property: each person’s estate is already separate. 

• Out of community of property with accrual: By way of an antenuptial agreement, each person’s estate is separate, apart from assets accrued during the marriage, which are divided 50-50. 

Settlement agreement 

The most favourable outcome in a divorce is when the two parties separate on amicable terms, agreeing on arrangements for the custody of their children and how their property will be divided, among other things. This is known as an uncontested divorce. The terms of the settlement, agreed to by both parties in association with a divorce attorney, are set out in a divorce settlement agreement, which becomes an order of the court. 

Court orders to pension funds 

A case to come before the Pension Funds Adjudicator in 2022 highlights the importance of the correct wording of the divorce order for it to be enforceable. 

According to the ruling, a couple (Mr and Ms S) who divorced in 2009 did not know about the “clean-break” principle whereby savings in a spouse’s retirement fund are immediately divided on divorce. 

Only on her ex-husband’s death did Ms S claim her portion of his retirement savings, which he, in the meantime, had bequeathed to his new wife. The divorce agreement had stated: “…the parties agree that on maturity of the retirement annuity, the plaintiff shall be entitled to 50% of the maturity benefits/value of the retirement annuity as at the date of such maturity. The plaintiff’s 50% share of such benefits shall be paid … into a banking account of the plaintiff’s choice.” 

Ms S laid a complaint against the pension fund, which the adjudicator dismissed, agreeing with the fund that the divorce order was unenforceable: “The adjudicator cannot grant the complainant the relief that she seeks, because the court order does not cite the first respondent as a party to the proceedings.” 

In other words, not only did the divorce order transgress the clean-break principle, which would have enabled Ms S to be paid out her share at the time of her divorce, but it did not name the fund, thus absolving it of responsibility. 

In an article “Divorce and pensions: navigating recent legislative changes”, Dionne Nagan, Legal Counsel at Ninety One, outlines the requirements for a court order to a retirement fund to be enforceable: 

• The fund must be identified or identifiable. “Ideally, the fund name and policy number should be included. If a member has more than one policy, and no policy number is given, the pension interest will be split across all relevant policies in the fund. If the member belongs to more than one fund but only one fund is identified, the order is not binding on the other funds,” Nagan says. 

• Pension interest must be explicitly awarded. “The order must refer specifically to ‘pension interest’. References to “fund value” or “benefits” are insufficient. The order must state either a percentage or rand amount of the pension interest.” 

• The fund must be instructed to pay. “The order must direct the fund, not the member-spouse, to make the payment.” 

Nagan recommends that parties submit a draft order to the fund for review before finalising it in court. “If an order is found to be non-binding, it must be amended. The pension interest will still be calculated using the original divorce date – not the date of the amendment ,” she says.