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Government Employee Divorce & Pension Fund

Government Employees thinking of gettng divorced (and their spouses) will be interested that on the 11th of March 2024 National Treasury proposed some amendments to the Government Employees Pension Law, to account for the requirements of the two-pot retirement system; and there were numerous divorce-related changes included with that.

Changes proposed to Government Employees Penson Law

A loophole is closed so that members cannot reduce their pension holdngs after divorce proceedings have begun, but before the divorce order has been issued. It is also made clear that the former spouse is entitled to the accrual of fund return from the date of the court order until payment or transfer of the deduction to them.

• “‘Divorce Act’ means the Divorce Act, 1979 (Act No. 70 of 1979);”;
• “‘pension interest’, in relation to a court order granted under section 7(8)(a) of the Divorce Act or a court order granted in respect of the division of assets of a marriage according to the tenets of a religion, means, in relation to a party who is a member of a fund, that member’s share of the value of the fund, determined in terms of the rules of that fund, on the date of the court order;”;
• 1A. In the event of a conflict between the provisions of this Act and the Divorce Act, the provisions of this Act prevail.”.
• “Withdrawals and deductions from member’s pension benefits 21. (1)(a) No benefit or right in respect of a benefit payable under this Act shall be capable of being assigned or transferred or otherwise ceded or of being pledged or hypothecated, except for in terms of a court order in terms of
  • section 26 or 40 of the Maintenance Act, 1998 (Act No. 99 of 1998),
  • section 7(8) of the Divorce Act or
  • a court order granted in respect of the division of assets of a marriage according to the tenets of a religion.
• The following section is hereby substituted for section 24A of the Government Employees Pension Law: “Payment of pension interest upon divorce or dissolution of marriage according to tenents of religion 24A.
  1. The Fund must reduce a member’s pension interest by any amount assigned from the member’s pension interest to the member’s former spouse in terms of a decree of divorce granted under section 7(8)(a) of the Divorce Act or a court order granted in respect of the division of assets of a marriage according to the tenets of a religion.
  2. A pension fund may not, without the consent of the former spouse, grant a loan or guarantee or permit a savings withdrawal benefit to be taken by a member if—
     1. the fund received a formal notification from the former spouse that a divorce has been instituted, as defined in the Divorce Act; or
     2. an application has been made for a court order in respect of the division of assets of a marriage in accordance with the tenets of any religion.
  3. The prohibition in terms of subsection (2) applies until a court order is issued.
  4. 1. Subject to paragraph (k), for purposes of section 7(8)(a) of the Divorce Act or in terms of or a court order granted in respect of the division of assets of a marriage according to the tenets of a religion, the portion of a member’s pension interest assigned to the member’s former spouse is deemed to accrue to the member on the date on which the decree of divorce or court order is granted.
     2. The amount of the member’s pension interest in the Fund must be determined and the amount of the member’s pension interest that is assigned to the former spouse must be calculated by the Fund in accordance with the rules as at the date of the decree of divorce or the date of the court order granted in respect of the division of assets of a marriage according to the tenets of a religion.
     3. Prior to determining the amount of the member’s pension interest that is assigned to the former spouse, the amount of the member’s pension interest referred to in paragraph (b) must first be reduced in accordance with the rules by any amount of the member’s pension interest which, in a previous divorce or a previous court order granted in respect of the division of assets of a marriage according to the tenets of a religion, was paid over or awarded to another party.
     4. 1. (d) (i) The benefit that is subsequently payable to the member shall, as provided in the rules, be decreased by reducing the member’s years of pensionable service to take into account the pension interest of the member which was assigned to any former spouse of the member.
        2. (ii) The rules referred to in subparagraph (i) shall be made on the advice of an actuary.
     5. (e) The Fund must, within 45 days of the submission of the court order by the former spouse of a member, request the former spouse to elect whether the amount to be deducted must be—
        1. (i) paid directly to the former spouse; or
        2. (ii) transferred to an approved retirement fund on behalf of the former spouse.
     6. (f) The former spouse must, within 120 days of being requested to make a choice—
        1. (i) inform the Fund of the manner in which the amount referred to in paragraph (e) must be dealt with; and
        2. (ii) if the former spouse chooses that the amount must be—
           • (aa) paid to the former spouse directly, provide the Fund with the details that are necessary to effect the payment; or
           • (bb) if the former spouse chooses that the amount must be transferred to an approved pension fund on his or her behalf, provide the Fund with the details of that approved retirement fund;
     7. (g) The Fund must pay or transfer the amount in the circumstances contemplated in—
        1. (i) paragraph (f)(ii), within 30 days; or
        2. (ii) paragraph (f)(iii), within 60 days, in accordance with the former spouse’s choice, failing which interest becomes payable on such amount at a rate determined in the rules.
     8. (h) In the event that the former spouse fails to make a choice or identify the approved retirement fund to which the amount must be transferred within the period referred to in paragraph (f), the Fund must pay the amount directly to the former spouse within 30 days of the expiry of that period, failing which interest becomes payable on such amount at a rate determined in the rules.
     9. (i) Despite paragraph (h), in the event that the Fund cannot reasonably ascertain the manner in which the payment to the former spouse must be effected, the Fund must retain the amount plus interest as determined in the rules of the Fund, until such time as details of the manner in which that payment must be effected is made available to the Fund by the member, the former spouse or any other person whom the Fund is satisfied has the necessary authority and capacity to instruct the Fund in that respect;
     10. (j) A former spouse—
         1. (i) is not a member or beneficiary in relation to the fund; and
         2. (ii) is entitled to the accrual of fund return from the date of the court order until payment or transfer of the deduction contemplated in subsection (1)(b).
     11. (k) Any portion of a member’s pension interest assigned to a former spouse in terms of a decree of divorce or a court order granted prior to the enactment of this subsection must, for purposes of any law other than the Income Tax Act including, but not limited to, section 7(9)(a) of the Divorce Act or a court order granted in respect of the division of assets of a marriage according to the tenets of a religion, be deemed to have accrued to the member on the date of enactment of this subsection, and must be paid or transferred in accordance with paragraphs (a) to (j).”.

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Info on Divorces & Pension Fund assets

Alongside the house being lived in; holdings in pension funds are often the biggest assets in a divorce.

NB: Under the new 2 pot system law, you must formally notify your spouse's pension fund in writing about the divorce proceedings, along with providing proof. Once this notice is given, the pension fund is legally prohibited from permitting any withdrawals, loans, or guarantees without the consent of the non-member spouse.

Proposed two pot retirement system and impact on divorce settlements:

• Faking divorce to withdraw retirement savings
• Faking divorce to effect a tax arbitrage while withdrawing retrement savings
• Changes to Government Employees Pension Rules when divorcing

Get your info directly from spouse's pension fund, not indirectly from your spouse.

Divorce and pension fund payouts

Undisclosed Pension Interest at divorce results in amendment to divorce order

Pension interest in the accrual calculation, and the related tax liability

When the state pension fund refused to pay

• The Wiese Pension Case
• Spouse pension payouts on divorce for Post Office & Transnet workers

Navy pension payout post-divorce

Unmarried couples & pensions

Divorce & pension funds discussion forum

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