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n Tydskrif vir die Suid-Afrikaanse Reg - Pensioendeling by egskeiding steeds onbevredigend en verwarrend gereël
Division of pension benefits on divorce still unsatisfactory
Although the South African Law Commission recommended in 1999 in it's Final Report on the Sharing of Pension Benefits that the sharing of retirement fund benefits by erstwhile spouses should be governed by a dedicated act separate from the Divorce Act, the legislature has not been convinced of the urgency of this matter and ignored the report. This has left South African subjects involved in divorce proceedings in an unfavourable position compared to that of their brothers and sisters in other jurisdictions where divorce is governed by modern legislation that makes provision for pension splitting. Experience gained after the 1989 amendment of the Divorce Act has reconfirmed what was predicted more than two decades ago: the inclusion of retirement fund benefits as ordinary assets forming part of the matrimonial property of spouses is not to the benefit of the weaker party. At the dissolution of a marriage only the division of ordinary assets should be governed by principles of matrimonial property law - retirement fund benefits should be excluded from those calculations. The non-member spouse is entitled to share in the retirement fund benefits which accumulated during the marriage. The legislature should prescribe clear formulae to be used in the determination of the extent of this right taking cognisance of the various types of retirement schemes. The social destination of retirement benefits should preclude any form of utilisation of these benefits by the person entitled to it prior to him reaching retirement age. For this reason a person's entitlements to retirement benefits should be excluded from the determination of his creditworthiness and should be ring fenced against any attachment orders. By amending the Pension Funds Act in September 2007 the legislature opened up the possibility that the non-member spouse may claim her share of the value of the accumulated pension benefit on divorce and the fund would be compelled, if so desired, to pay out the claimant's share of the accumulated benefit in cash. The pension fund adjudicator went even further and interpreted the amendment to the act as if it was intended to have unlimited retrospective effect. In this article it is argued that this latest legislative amendment runs counter to the premises underlying provisions for retirement benefits and will probably in the not so distant future result in an additional burden being placed on taxpayers to contribute to payments as alimentation grants to erstwhile divorced spouses who misappropriated the capitalized share of their funds after their divorce. It is submitted that it would have been more appropriate if the legislature provided for pension splitting - where the non-member becomes entitled on a locked-in basis, to a share in the accumulated pension fund benefit by way of a deferred pension benefit and not to a cash benefit. It is submitted that the current formulation of the new sections in the Pension Funds Act and the Income Tax legislation are not synchronized with the result that the poor member spouse will inevitably end up paying all applicable tax due on the total value of the retirement benefits and will then be left to struggle to reclaim the amount of these taxes that should have been deducted from the share of the benefit received by his erstwhile spouse on their divorce.
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