Can I get a percentage of my husband’s preservation fund in our divorce settlement?

I divorced my husband and he has a preservation fund because he had withdrawn his pension fund some years ago. For our divorce settlement can he mention that I can get money from the preservation fund and what percentage can I get? Or that is not allowed? We were married in community of property. Is one not supposed to get half of whatever a financially-strong spouse has?

Thank you for your question.

There are certain circumstances where a person may have a claim for a share of their spouse’s retirement fund benefit in the event of a divorce.

Read together with the Divorce Act, the Pension Fund Act makes provision for the deduction of a pension benefit in the event of divorce, bearing in mind that this refers only to approved retirement funds, such as a preservation fund in your instance.

It also includes pension, provident and retirement annuity funds, but excludes living and life annuities.

The nature of your marriage contract is also a factor in determining whether a divorcing spouse has a claim for a share of the member spouse’s pension interest.

In your case, you have mentioned that you are married in community of property, which means that you share a single, joint estate.

This means that you have an automatic right to 50% of the joint estate when you get divorced, which includes your husband’s preservation fund.

In calculating how much of your spouse’s retirement benefits you are entitled to – referred to as ‘pension interest’ – the type of retirement fund is a determining factor.

In the case of a preservation fund, the pension interest refers to the benefits a member of the fund would have been entitled to in terms of the scheme rules had their membership ceased on the date of divorce as a result of their resignation.

This also means that your husband must still be a member of the preservation on the date that your divorce order goes through.

If he retires or withdraws from the fund any time before the actual date of your divorce, there is effectively no pension interest – and the capital will be dealt with as part of the division of assets in the divorce settlement agreement.

Essential to the successful awarding of the pension interest benefit to a non-member spouse is the accurate wording of the divorce order and it is highly advisable that you seek the advice of an experienced divorce attorney.

Any uncertainty in the divorce order can result in the pension fund administrator rejecting the settlement agreement and refusing to pay out the pension interest benefit.

In such instances, remember that your divorce settlement agreement cannot simply be amended by you and your spouse.

You will need to approach the high court for an amendment to the order, which can be a costly exercise. Specifically, ensure that your divorce settlement agreement includes specific reference to ‘pension interest’ as defined by the Divorce Act and that it specifically mentions the name of your husband’s preservation fund (i.e. not just the name of the administration company or insurer).

The agreement must also clearly state how much of the pension interest is owed to you and must include an instruction to the fund to make the deduction and payment to you.

Once the retirement fund is satisfied that your divorce order is valid, the fund is obliged to ask you how you would like to receive this benefit.

You have the option to either (i) take the full amount in cash or (ii) transfer the benefit to another retirement fund. Note that you do not have the option to take a combination of both.

These critical decisions should ideally be navigated together with an experienced financial advisor, bearing in mind that there are tax implications in the event of withdrawal that need to be taken into account.

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