Some Practical Effects of the Financial Services Laws General Amendment Act 2008 on Amending Section 37D(4) of the Pension Funds Act

• Jurisdiction: South Africa
• Published date: 25 May 2019
• Author: Silas Mothupi
• Citation: (2010) 22 SA Merc LJ 214
• Pages: 214-229
• Date: 25 May 2019

Some Practical Effects of the Financial Services

Laws General AmendmentAct 2008 on

amending Section 37D(4) of the Pension Funds

Act

SILAS MOTHUPI*

Office of the Pension Funds Adjudicator

1 Introduction

The Pension Funds Act

1

(‘the Act’) has been amended because of changes

in the retirement fund industry and a need to rethink some of the provisions of

the Act. The Office of the Pension Funds Adjudicator (OPFA) has been

working on several research projects to respond to these amendments and

guide the industry on interpreting and applying these amendments to pension

complaints.

One of the sections amended is s37D. Since its amendment on 13

September 2007

2

the OPFAhas been receiving numerous complaints arising

from the application and interpretation of this provision. I will discuss the

practical implications of the amendments to s37D(4) with reference to

the kinds of complaints received by the OPFAand whether they go far enough

to address the causes of the complaints that prompted the amendment. I will

thus deal with the response of the OPFAto these complaints, the effects of

these amendments, and some of the principles arising from the amendment

of s 37D.

2Historical Background

Historically, the member spouse’s pension benef‌its could not be divided,

because they were not regarded as forming part of the member’s matrimonial

estate. Under s 37A of theAct, a member or a benef‌iciary’s benef‌it may not,

among other things, be reduced, transferred, ceded, pledged, hypothecated or

attached save to the extent permitted by the Act, the Income Tax Act

3

or the

Maintenance Act.

4

Thus the accrued pension of the member spouse as at

the date of divorce was not regarded as an asset in his estate, or her estate or,

*LLB (Vista) LLM (Unisa). Advocate of the High Court of South Africa. SeniorAssistant

Adjudicator: Office of the Pension FundsAdjudicator. The views here are my own and do not

necessarily express those of the Officeof the Pension Funds Adjudicator.

1

Act 24 of 1956.

2

Adv M Ramabulana, the Head of the New Complaints Unit of the OPFA, conf‌irmed that they

received 250 complaints after the amendment of s 37D on 13 September 2007.

3

Act 58 of 1962.

4

Act 99 of 1998.

214

(2010) 22 SA Merc LJ 214

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where the marriage was contracted in community of property, as an asset in

the joint estate capable of being deducted and transferred to the non-member

spouse. This statutory restriction protected the pension savings of individuals

who took the trouble to save for their individual retirement.

But this position was reversed after the South African Law Commission

conducted an investigation in this regard and made recommendations that led

to the promulgation of the Divorce Amendment Act 7 of 1989. Section 7(7)

and (8) of the Divorce Act deems a member spouse’s pension interest to be an

asset in his or her estate for the purposes of determining the patrimonial

benef‌its to which the parties to divorce may be entitled. This provision was

fair and equitable, given the hardships to which non-member spouses were

subjected until then. But the question is whether this statutory provision has

been effective in addressing the non-member spouse’s inability to access the

member spouse’s benef‌it in a fund, given that the non-member has been

denied access for numerous reasons by funds and service providers.

3Types of Complaints Received By the OPFAFollowing the

Divorce Amendment Act

After the Divorce Amendment Act was promulgated, the OPFA received a

number of complaints, mainly from non-member spouses claiming payment

of a share of their former spouse’s pension interests on divorce. The

retirement industry, especially service providers, also received such com-

plaints, mostly involving a refusal by a fund to pay the portion of the pension

interest assigned to the non-member spouse in terms of a divorce order

because that order was not valid and enforceable.

5

Pension funds usually relied on the fact that the non-member spouse could

access his or her share of the pension interest only upon the withdrawal,

resignation, retrenchment or even death of the member spouse, where the

member spouse died in service.

6

The reason was that under s7(8) of

the Divorce Act, as it was then, the non-member spouse could access her

share of the pension interest only when the pension benef‌its accrued to the

member spouse. This situation created many problems for the non-member

spouse, who had to wait until the member spouse withdrew from the fund by

resignation, retrenchment or retirement before she could access her portion of

the pension interest or benef‌it. This result also undermined the ‘clean break’

principle in divorce matters.

7

Funds and administrators also raised the defence that the fund was not named

in the divorce order,

8

even though it could simply be identif‌ied from the divorce

5

L Dosson v Cape Municipal Pension Fund (PFA/WE/21917/200817 September 2008 (unreported)).

6

S Lund v Nedgroup Defined Contribution Pension Fund and Another (PFA/GA/22632/08/LN 21

July 2008 (unreported)).

7

Mashilo v Basil Read Provident Fund [2005] 1 BPLR 51 (PFA) and Mouton v Southern Staff

Pension Fund [2003] 4 BPLR 4581 (PFA).

8

L Dosson v Cape Municipal Pension Fund supra note 5.

PRACTICAL EFFECTS OF THE AMENDED PENSION FUNDS ACT215

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