Pension interest in a divorce is often the largest single asset either spouse owns, and it is also the asset most frequently lost through a badly drafted order. A retirement fund is not obliged to pay anything simply because a decree of divorce says so. The fund pays only where the order meets the requirements of the Divorce Act 70 of 1979 and the Pension Funds Act 24 of 1956, and where the fund is able to identify itself and the amount from the wording of the order.
Pension Interest in a Divorce: What the Term Actually Means
“Pension interest” is a defined term, not a general description of retirement savings. Section 1 of the Divorce Act defines it in two limbs.
- Where the party is a member of a pension fund other than a retirement annuity fund, pension interest means the benefits to which that member would have been entitled in terms of the rules of the fund if membership had been terminated on the date of the divorce on account of resignation from office.
- Where the party is a member of a retirement annuity fund established in good faith to provide life annuities, pension interest means the total of that party’s contributions to the fund up to the date of the divorce, together with annual simple interest on those contributions, calculated at the rate prescribed at that date by the Minister of Justice under section 1(2) of the Prescribed Rate of Interest Act 55 of 1975.
Both limbs were added to the Divorce Act by section 1 of Act 7 of 1989, with effect from 1 August 1989. Two consequences follow. The resignation limb is a hypothetical calculation, because nobody actually resigns. The retirement annuity limb is contributions plus simple interest, not fund value, so where a retirement annuity has grown well that figure can be materially less than the investment value.
A separate definition now sits in section 1 of the Pension Funds Act, inserted by section 1(f) of the Pension Funds Amendment Act 31 of 2024. For the purposes of an order granted under section 7(8)(a) of the Divorce Act, or an order dividing the assets of a marriage according to the tenets of a religion, pension interest means the member’s individual account or minimum individual reserve, as determined in terms of the rules of that fund, on the date of the court order.
The two definitions do not measure the same thing, and they are not measured on the same date. Section 2(6) of the Pension Funds Act, added by section 2 of Act 31 of 2024, resolves the position: where the provisions of the Pension Funds Act conflict with the Divorce Act, the Pension Funds Act prevails. For funds registered under the Pension Funds Act, the value the fund works with is therefore the individual account or minimum individual reserve at the date of the order.
Vermeulen Attorneys assists spouses on both sides of a retirement fund claim. If you are unsure which definition governs pension interest in a divorce involving your fund, obtain legal advice before you sign a settlement agreement. Contact Vermeulen Attorneys to arrange a consultation.
Your Matrimonial Property Regime Decides Whether a Claim Exists
The division of pension on divorce is not automatic. It depends first on how the parties are married. Section 7(7)(a) of the Divorce Act deems the pension interest of a party to be part of that party’s assets when the patrimonial benefits of the divorce are determined, subject to two qualifications.
- Section 7(7)(b) reduces the deemed amount by any part of the pension interest that was paid over, awarded, or accounted in favour of another party in a previous divorce. A second divorce does not permit a second division of the same value.
- Section 7(7)(c) excludes the deeming entirely where the marriage is out of community of property, entered into on or after 1 November 1984 in terms of an antenuptial contract that excludes community of property, community of profit and loss and the accrual system.
The practical position by regime is as follows.
- In community of property. The pension interest falls into the joint estate and is shared. This is the clearest route to a division of pension on divorce.
- Out of community with accrual. The pension interest is deemed part of the member’s assets and enters the accrual calculation. Under section 3(1) of the Matrimonial Property Act 88 of 1984, the spouse whose estate shows the smaller accrual has a claim against the other for half of the difference between the accruals. Section 4(1)(a) sets out how accrual is calculated.
- Out of community without accrual, post 1 November 1984. Section 7(7)(c) applies and there is no pension interest claim. A spouse in this position may need to consider a section 7(3) redistribution claim, which is a different remedy with its own requirements, and which the court may or may not grant depending on the facts and the contributions proved.
Forfeiture is a separate question again. Section 9 of the Matrimonial Property Act allows a court to order forfeiture of patrimonial benefits in defined circumstances, and it is not a general penalty for misconduct during the marriage. Our article on forfeiture of patrimonial benefits and misconduct explains where the line falls.
How the Amount Is Calculated, and Why the Date Matters
Three dates compete when pension interest in a divorce is valued, and confusing them is a common source of dispute.
- The date of separation. Legally irrelevant to the calculation. Spouses often assume growth after separation belongs to the member alone. Neither statute says so.
- The date of divorce. The date used by the Divorce Act definition.
- The date of the court order. The date used by the Pension Funds Act definition, and the date on which the assigned portion is deemed to accrue to the member under section 37D(4)(a).
Section 37D(4)(a)(iii) requires the deduction to reduce the member’s individual account or individual reserve at the date of the court order, subject to section 37D(1A). Under section 37D(4)(c)(ii), the non-member spouse is entitled to the accrual of fund return from the date of deduction until payment or transfer, and therefore carries market movement in both directions. A settlement agreement that promises a fixed rand amount without addressing fund return is likely to produce a shortfall or a windfall that neither party intended.
A further limit catches parties late in a marriage. The Divorce Act definition asks what would have been payable on resignation at the date of divorce, which presupposes continuing membership. Where a member has already retired, resigned, or drawn the benefit, pension interest in a divorce may no longer be the right instrument, and the value may have to be addressed as an existing asset or as an annuity. Our articles on pension interests in late-in-life divorces and the division of assets and liabilities in late-in-life divorces deal with this in more detail.
The Section 7(8) Order: What the Court Must Say
Section 7(8) of the Divorce Act is the empowering provision. It operates despite any other law and despite the rules of any fund. Under section 7(8)(a)(i), the court granting the decree may order that any part of the member’s pension interest which is due or assigned to the other party under section 7(7) be paid by the fund to that other party when pension benefits accrue in respect of the member.
Under section 7(8)(a)(ii), substituted by section 11 of Act 55 of 2003 with effect from 31 March 2005, the court may order the registrar to notify the fund that an endorsement must be made in the fund’s records that the portion is payable to the other party, and that the administrator must furnish written proof of that endorsement to the registrar within one month of receipt of the notification.
A workable section 7(8) order ordinarily does five things.
- Names the fund accurately, or describes it so that the fund is identifiable from the order itself.
- Records the member’s membership or reference number where it is known.
- Expresses the award as a percentage of the member’s pension interest, or as a stated amount, and identifies the date on which that value is determined.
- Uses the statutory language of section 7(8), so that the order is recognisable to the fund as an order made under that section.
- Directs the fund to make the payment or transfer to the non-member spouse.
Orders drafted in general terms, such as an order that the parties share “the pension”, routinely fail. The fund is not entitled to guess which fund was meant, which value was meant, or on what date. A section 7(8) order that cannot be executed usually requires a variation application, at cost, years later.
If your settlement agreement deals with a retirement fund, have the section 7(8) order wording checked before the decree is granted. Vermeulen Attorneys assists with the drafting and review of divorce settlement agreements. Speak to an attorney before you sign.
Section 37D Deduction: How the Fund Actually Pays
Section 7(8) empowers the court. Section 37D of the Pension Funds Act empowers the fund. The two provisions are not interchangeable, and an order that cites the wrong one causes delay.
Section 37D(1)(d)(i) permits a fund to deduct from a member’s benefit any amount assigned to a non-member spouse in terms of a decree granted under section 7(8)(a) of the Divorce Act. That is the section 37D deduction. Without it, the fund has no power to pay a person who is not its member.
Two ranking rules limit what actually reaches the non-member spouse. Under section 37D(3)(a), an amount deducted under section 37D(1)(d) may only be deducted after the member’s individual account or minimum individual reserve has been reduced by any loan or guarantee amount referred to in section 37D(1)(a), where that loan or guarantee was granted before the court orders were made, whether or not the amount is payable. Under section 37D(3)(b), where more than one order provides for deductions at the same time, a maintenance order referred to in section 37D(1)(d)(iA) or (iB) ranks first and an order falling within the definition of “non-member spouse” ranks second. A divorce award does not displace a maintenance obligation, and a pre-existing housing loan reduces the pool before the award is calculated.
The section 37D deduction also carries a tax consequence the parties should price in. Under section 37D(4)(a), the assigned portion is deemed to accrue to the member on the date of the court order, and the fund applies for a tax directive from SARS. The outcome depends on the election the non-member spouse makes, and that election cannot usually be reversed.
The Statutory Timelines the Fund Must Meet
Section 37D(4)(b) sets out a sequence of periods that governs how quickly the money moves. The clock only starts once the non-member spouse submits the court order to the fund.
- 45 days. The fund must, within 45 days of the submission of the court order by the non-member spouse, request the non-member spouse to elect whether the amount is to be paid directly to them or transferred to a fund on their behalf.
- 120 days. The non-member spouse must, within 120 days of being requested to make an election, inform the fund how the amount is to be dealt with, and provide either the payment details or the details of the receiving fund.
- 60 days. The fund must pay or transfer the amount within 60 days of being informed how the amount is to be dealt with.
- 30 days. Where the non-member spouse fails to make an election or to identify the receiving fund within the 120 day period, the fund must pay the amount directly to the non-member spouse within 30 days of the expiry of that period.
Section 37D(4)(b)(v) qualifies the last point. Where the fund cannot reasonably ascertain how payment is to be effected, it must retain the amount and the fund return until the details are provided by the member, the non-member spouse, or another person. A non-member spouse who ignores correspondence from the fund can therefore find the money sitting in the fund indefinitely.
Why a Pension Fund Refuses to Pay a Divorce Order
Funds do not reject orders to be difficult. They reject orders they are not lawfully able to execute. Where pension interest in a divorce has been awarded but the fund declines to pay, the reason is usually one of the following.
- The fund is not named or identifiable. An order referring to “the respondent’s pension” gives the administrator nothing to act on.
- The wrong entity is named. The employer, the administrator, or the product provider is named instead of the registered fund.
- No section 7(8) language. The order awards a share of a retirement benefit without invoking section 7(8) of the Divorce Act, so the fund has no section 37D(1)(d)(i) power to deduct.
- The amount is not determinable. No percentage, no amount, or no date on which the value is fixed.
- The award exceeds what is available. Section 37D(3)(a) has already reduced the account by a pre-existing housing loan or guarantee, or a maintenance order ranks ahead under section 37D(3)(b).
- The member is no longer a member. The benefit has already accrued, been withdrawn, or been converted to an annuity.
- The order deals with a product the Pension Funds Act does not reach. This is the difficulty that arises with living annuities, discussed below.
Where a fund refuses, or where it misses the statutory periods, the first step is to obtain the fund’s written reasons. Depending on the reason, the remedy may be a supplementary or varied order from the divorce court, a complaint to the Pension Funds Adjudicator, or, where a determination has been made, an application to the Financial Services Tribunal for reconsideration. Confirm the current complaint requirements with the Office of the Pension Funds Adjudicator before lodging. The correct route depends on the facts and the procedural posture.
If a fund has rejected your divorce order, do not simply resubmit it. Vermeulen Attorneys assists with defective section 7(8) orders and with variation applications. Contact us to discuss the position.
The Two-Pot Retirement System and What It Changed
The two-pot retirement system introduced a savings component and a retirement component into fund arrangements, and it introduced a savings withdrawal benefit that a member may take during membership. That creates an obvious risk in a divorce: a member could withdraw from the savings component while the divorce is running and reduce the value available to the non-member spouse.
The Pension Funds Amendment Act 31 of 2024 addresses this directly. Section 37D(3)(aA), inserted with effect from 1 September 2024, provides that a fund may not, without the consent of the non-member spouse, grant a loan or guarantee, or permit a savings withdrawal benefit to be taken by a member, if the fund has received written notification from the member or the non-member spouse with proof that:
- a divorce has been instituted, as defined in the Divorce Act; or
- 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.
Section 37D(3)(aB) provides that this prohibition applies until finalisation of the divorce or until a court order is issued.
Read carefully, the protection is conditional. It is triggered by written notification to the fund with proof, and it is not automatic on the issue of a summons. A non-member spouse who does not notify the fund does not have the protection. Notifying every relevant fund in writing, with proof that the divorce has been instituted, should be an early step in the matter rather than a step taken at settlement stage.
Living Annuities on Divorce
Living annuities on divorce sit outside the section 7(8) and section 37D machinery in an important respect. Once a member has retired and purchased a living annuity, the capital ordinarily belongs to the insurer, and the annuitant holds a right to a stream of income rather than a fund credit. There is usually no “pension interest” as the Divorce Act defines it, and usually no fund account for a section 37D deduction to reduce.
That does not mean the value is beyond reach. Our firm’s position is that the annuitant’s right to the income stream may nevertheless carry a patrimonial value capable of being taken into account when the parties’ estates are compared, particularly under the accrual system. The appropriate mechanism is ordinarily a personal claim against the annuitant spouse, addressed in the settlement agreement, rather than an order directed at the insurer. Whether that approach succeeds depends on the terms of the annuity, the matrimonial property regime, and the evidence placed before the court.
The practical point for a spouse facing living annuities on divorce is to obtain the annuity contract early. A settlement that assumes the section 7(8) route is available may be unenforceable against the insurer.
A GEPF Divorce Claim Works Differently
The Government Employees Pension Fund is established under its own legislation and is not a fund registered under the Pension Funds Act. A GEPF divorce claim therefore follows the Government Employees Pension Law and the fund’s own rules rather than section 37D of the Pension Funds Act, even though the enabling order is still made under section 7(8) of the Divorce Act.
Two features matter to the parties. The value assigned to the non-member spouse is settled by reference to the fund’s own calculation, and its requirements for the wording of the order are strict, so orders drafted for a private fund are frequently rejected. Where the non-member spouse takes the benefit as a lump sum, the member’s pensionable service may be reduced, which affects the member’s eventual pension. A member who has not been advised of this can be seriously prejudiced by an award that looked straightforward in the settlement agreement.
Confirm the current documentary requirements and the calculation methodology with the Government Employees Pension Fund directly before finalising the order, because the fund updates its requirements periodically.
Protecting the Position Before the Divorce Is Finalised
The clean-break principle is the policy that a divorcing couple should be able to separate their financial affairs at divorce rather than remaining tied to one another until the member eventually retires. The clean-break principle is now reflected in the machinery of section 37D(4), which allows the assigned portion to be paid or transferred within the statutory periods rather than deferred to the member’s retirement date. It is a principle, not a guarantee, and it does not assist where the order itself is defective.
Practical steps that protect the position include the following.
- Notify every relevant fund in writing, with proof that the divorce has been instituted, so that the section 37D(3)(aA) prohibition is engaged.
- Obtain a written pension interest quotation from each fund, stating the basis and the date used.
- Identify each fund correctly by its registered name and number in the settlement agreement.
- Deal expressly with fund return between the date of the order and the date of payment.
- Address the tax position and the election before the agreement is signed, not afterwards.
- Where the estate is at risk, consider whether an application under section 8(1) of the Matrimonial Property Act for immediate division of the accrual is appropriate, which requires proof that the applicant’s right to share in the accrual is being or will probably be seriously prejudiced.
Settlement agreements are difficult to escape once they are made an order of court. Our article on why you should think carefully before you sign a divorce settlement sets out the consequences.
What to Do Next
Pension interest in a divorce rewards early, careful work and punishes assumptions. The definition that applies depends on the fund. The existence of a claim depends on the matrimonial property regime. The value depends on the date. Payment depends on wording that the fund can lawfully act on, and on statutory periods that only begin once the order is submitted.
Vermeulen Attorneys advises members and non-member spouses on retirement fund claims, section 7(8) orders and defective orders that funds have refused to execute. If a retirement fund forms part of your matrimonial estate, obtain legal advice before the settlement agreement is signed. Read more about our divorce services, or contact our offices to arrange a consultation.
Frequently Asked Questions
Is pension interest in a divorce automatically split fifty-fifty?
No. There is no automatic half share. Section 7(7)(a) of the Divorce Act deems pension interest to be part of the member’s assets, and what happens after that depends on the matrimonial property regime and on what the parties agree or the court orders. A marriage in community of property produces a shared joint estate. A marriage with accrual produces a claim for half the difference between the accruals under section 3(1) of the Matrimonial Property Act, not half of the pension itself.
Can I claim a share of my spouse’s pension if we are married out of community of property?
It depends on the antenuptial contract. Where the accrual system applies, the pension interest is deemed part of the member’s assets and enters the accrual calculation. Where the marriage was entered into on or after 1 November 1984 in terms of an antenuptial contract that excludes community of property, community of profit and loss and the accrual system, section 7(7)(c) excludes the deeming and there is no pension interest claim. A section 7(3) redistribution claim may be available in some cases, and whether it succeeds depends on the facts and the evidence.
What happens if the pension fund refuses to pay the divorce order?
Ask the fund for written reasons first. Depending on the reason, the remedy may be a varied or supplementary court order, a complaint to the Pension Funds Adjudicator, or an application to the Financial Services Tribunal for reconsideration of a determination. Resubmitting the same order without addressing the defect rarely helps.
Can my spouse withdraw retirement savings during the divorce under the two-pot retirement system?
Not once the fund has been properly notified. Section 37D(3)(aA) prevents a fund from granting a loan or guarantee, or permitting a savings withdrawal benefit, without the non-member spouse’s consent, where the fund has received written notification with proof that a divorce has been instituted. The protection depends on the notification being given, so notify every relevant fund in writing as early as possible.
Does a section 7(8) order work against a living annuity?
Usually not in the same way. Once a living annuity has been purchased, the capital ordinarily belongs to the insurer and the annuitant holds a right to income, so there is generally no pension interest as defined and no fund account for a section 37D deduction to reduce. Living annuities on divorce are ordinarily addressed as a personal claim between the spouses in the settlement agreement, and the outcome depends on the annuity terms and the matrimonial property regime.
Is a GEPF divorce claim handled the same way as a private fund claim?
No. The Government Employees Pension Fund is not registered under the Pension Funds Act and applies its own law and rules, although the order is still made under section 7(8) of the Divorce Act. A GEPF divorce claim has its own wording requirements, and taking the award as a lump sum may reduce the member’s pensionable service and therefore the member’s eventual pension. Confirm the fund’s current requirements before the order is granted.
Is the division of pension on divorce taxed?
Tax may arise. Under section 37D(4)(a) of the Pension Funds Act, the assigned portion is deemed to accrue to the member on the date of the court order, and the fund applies for a tax directive. The outcome depends on the election the non-member spouse makes between direct payment and transfer to another fund, and on the Income Tax Act provisions applying at the time. Obtain advice before the election is made, because it is generally not reversible.
