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Have you wondered what happens to your living annuity upon divorce?

Some serious calculations are needed.

You might have just read the heading of this article and thought, “it’s probably the same as with my pension or retirement annuity”. Wrong.

I might get a lot of lip for writing about this, but I believe it is a very important factor to consider and know of when you have a living annuity and in the process what happens to the living annuity when getting divorced. There is no reason to shy away from the hard facts of which is set out in our own legislation. Is a spouse able to claim from a living annuity in the case of divorce?

A member’s pension interest is protected from creditors under Section 37A of the Pension Funds Act. It is important to read this section alongside the applicable sections of the Divorce Act. According to the Divorce Act Section 7(7) it stipulates that a pension interest will form part of assets upon divorce. One must note that according to Section 7(7) the non-member spouse is only entitled to a portion of the member spouse’s benefit if it qualifies as pension interest.

What is the definition of pension interest: It is defined in Section 1 as the benefits to which a member would have been entitled in terms of the rules of the fund if his membership of the fund would have been terminated on the date of the divorce because of his resignation from office. It is the amount that the member is entitled to or that he/she would have received had the membership stopped on the date of the divorce. In effect this means that if the member had already resigned and received a benefit that was paid to him or her before divorce, the member can’t be entitled to another resignation benefit on the date of divorce.

As soon as a member transferred his pension into a compulsory annuity it is no longer a retirement fund and won’t fall under the definition of pension interest of the Pension Funds Act. There are various court cases that can be used to show that if the pension benefit accrued to the member spouse before the date of divorce, this will not form part of his/her assets to be claimed under the Divorce Act. However, it is important to note that the non-member spouse may have a maintenance claim on the income received by the member spouse and this will be determined when looking at factors such as age, lifestyle, qualifications, income etc.

In conclusion it becomes important to do some serious calculations if you are pensioner and are planning to end your marriage and try and leave the emotions out of the equation.

ADVISOR PROFILE

Herman Klopper

Futurum Financial Group

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