Dawn Kirby writes:
I have been divorced for 13 years after a marriage of 23 years. I was allocated 25% of my husband’s provident fund on his retirement. In spite of his next birthday being his 60th, there is no option of his retirement or resignation from his current employment. Please advise me about how I might get “ownership” of my 25% share of his provident fund. I am now 59 years old, and need to realise the funds that are due to me.
Jackie Govender of Odyssey Legal Services replies:
Although section 7(a) of the Divorce Act of 1979 allows one spouse to deem the pension interest of the other spouse to be a part of the assets available for division on divorce, this pension interest is not immediately available to the non-member spouse in terms of the deed of settlement or divorce order.
The reader has been correctly informed that this benefit is not available to her until such time as the policy of her former spouse pays out. This could be in the event of his retirement, resignation, disability or death. She would only receive her share of the benefit at that time.
The reader states that she had been allocated a quarter share of the value in her former spouse’s provident fund. In terms of the definition of “pension interest” in the Divorce Act, this translates into 25% of the total amount. Had her former spouse resigned as a member of the fund, at the time of the divorce, she would have been entitled to her quarter share of the value in the spouse’s provident fund.
In this case, she does not have to wait until the benefit pays out. But this amount due to her does not increase in value as it does not partake in the growth of the fund, and if not expressly provided for in the deed of settlement, it will also not increase with the inflation rate.
Furthermore, the amount that is finally paid to the reader may be reduced by tax, even though her former spouse, to whom it actually accrues, is liable for the tax payable. The Income Tax Act gives him a right of recovery of the proportionate amount of taxes that can be attributed to the amount paid to the non-member spouse receiving such amount.
For herself and others in her position, this is a serious situation, and there is no simple answer. The regulators are still grappling with retirement fund reform. Prevention is the best cure, however, and it goes back to getting good financial advice at the outset of any major (or minor) change in one’s life.
In addition, divorce lawyers need to stay up to date with the prevailing pension fund legislation to ensure that they get the best possible settlement for their clients.