Can your ex claim on your Retirement Annuity?
This is a complex area in law and will depend on your initial marriage contract. It is governed by the Divorce Act and Pensions Fund Act.
In divorce law, the term “pension fund` is a generic name for all types of retirement funds that fall within the scope of The Pension Funds Act.
Typically, the non-member spouse is entitled to an agreed percentage of the pension interest. The pension interest is the sum of the contributions plus interest at a prescribed rate, up until the date of the divorce. The Pensions Amendment Act introduced the “clean break principle”, allowing the non-member spouse the court-ordered share on divorce.
What to do with the cash. The non-member can choose to receive a cash lump sum or to have the money transferred to an approved pension fund. You normally have 120 days to decide.
If you take the benefit in cash, you will pay tax on the pension interest.
If you transfer to another fund, the transfer will be tax free.
Payouts are most often rejected by administrators when the interest payout is incorrectly drafted in the settlement agreement. If not drafted properly, a court application ensues at a great cost.
In the event both spouses have a retirement benefit interest – each non-member is equally eligible to claim, “one from the other”.
It is wise to seek proper legal advice and always recommended to transfer the payout to another fund. Too often, South Africans are inadequately provided for in their retirement years.
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