A storm in a Twitter cup recently erupted when an insurer and fund administrator was accused of not paying pension money. File photo.
By Brett Ladouce
My mother always told me that the truth has three sides, namely my truth, your truth, and the true truth that lies somewhere between my truth and your truth. Strange as it sounds, the statement holds a lot of truth in our media-driven society.
A storm in a Twitter cup recently erupted when an insurer and fund administrator was accused of not paying the pension money of the mother of a complainant even though her mother had a court order. Armed with only these facts, we started throwing stones, bricks, and threats to cancel our policies at Goliath in support of David. By the time we got access to the other side of the story, Goliath was in intensive care and the reputational damage was already done. Now that the dust has settled, it might be a good time to objectively look at the facts of the matter and the legal framework within which those facts must be applied.
The facts of the matter are simple but complicated. Simply put, Mr. X, a member of a retirement fund administered by the insurer, and his wife, Mrs. X, got divorced. In terms of the divorce order, the fund was ordered to pay a portion of the pension interest of Mr. X to Mrs. X. It seems that the court order was only provided to the fund after Mr. X had already withdrawn from the fund and received all the benefits that he was entitled to in terms of the rules of the fund.
The complicated part is in the applicable legislation. If you were married after 31 October 1984 in the community of property or out of community of property, but with the accrual system and/or with community of profit and loss, your retirement fund savings (“pension interest”) will be deemed to form part of the assets that the court can divide between the parties when a divorce order is granted. The pension interest refers to the withdrawal benefit to which the member of the fund would have been entitled in terms of the rules of the fund if he or she resigned on the date of divorce. The divorce court can therefore make an order against the fund in terms of section 7(8) of the Divorce Act to pay a portion of your pension interest as of the date of the divorce to your spouse.
Section 37D(4)(b) of the Pension Funds Act sets out the following process that must be followed for the fund to make payment to a non-member spouse in terms of a divorce order that was granted against the fund:
1. 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 direct payment or transfer to another fund.
2. The non-member spouse must within 120 days of being requested to make an election make an election and communicate it to the fund.
3. The fund must pay or transfer the amount within 60 days of being informed by the non-member spouse how the amount must be dealt with.
From the above, it is clear that the non-member spouse has the responsibility in terms of the Pension Funds Act to provide the divorce order to the fund for the fund to give effect to the divorce order. The whole payment process is triggered by the non-member spouse when he or she provides the divorce order to the fund and claims payment from the fund in terms thereof. The fund cannot start the payment process without the consent and knowledge of the non-member spouse even if the divorce order is provided to the fund by the fund member. The non-member spouse therefore controls the activation of the fund’s payment process.
The fund will only be able to give effect to the divorce order if the fund still holds benefits on behalf of the member when it receives the divorce order from the non-member spouse. The Financial Services Tribunal recently confirmed that where a fund received the divorce order from the non-member spouse after it started the payment process of the withdrawal benefit of the member (for example, where the fund has already received a tax directive from Sars in relation to the withdrawal benefit), but before payment is made to the bank account of the member, the fund will still be liable to make payment to the non-member spouse as per the divorce order. The payment of the withdrawal benefit to the member after receiving the divorce order from the non-member spouse did not remove the obligation from the fund to make payment to the non-member spouse in terms of the divorce order. In this case, the fund had to pay the non-member spouse, as directed by the divorce order, and it then had to recoup any overpayment it made to the member directly from the member.
If the non-member spouse only provides the divorce order to the fund after the fund has already paid a withdrawal, retirement, or death benefit to or in relation to the member, the fund will not hold any money on behalf of the member that can be used to settle the obligation in terms of the divorce order. Put differently, the fund cannot pay money to the non-member spouse it no longer holds on behalf of or in relation to the member. The divorce order will thus be valid, but unenforceable against the fund.
Taking all the available information into account, the three sides of the truth in the matter seem to be:
1. My truth: The retirement fund/administrator does not want to pay my mother the portion of the pension interest of her ex-husband that she is entitled to in terms of a valid divorce order.
2. Your truth: The non-member spouse did not meet her obligations in terms of the Pension Funds Act to provide a copy of the divorce order to the fund and to claim her allocated portion of the pension interest of the member before the member received all his benefits from the fund.
3. The true truth: The fund is not in a financial position to give effect to a divorce order where the non-member spouse only provided the divorce order to the fund after the member has already left the fund and the fund has paid all the benefits that are due to that member in terms of the rules of the fund as it no longer holds any money on behalf of the member that can be used to pay the non-member spouse.
There are free, effective, and objective dispute resolution mechanisms in place if you are dissatisfied with the decision taken by the trustees of a retirement fund not to make payment to you as the non-member spouse in terms of a valid divorce order. Firstly, you can lay a complaint at the office of the Pension Funds Adjudicator who is in a position to make a ruling on the matter. If you are not happy with the decision taken by the Pension Funds Adjudicator, you can take that decision on review to the Financial Services Tribunal.
Social media can be a powerful tool to bring people together to fight the good fight to ensure that we receive fair treatment from retirement funds. When opinions are, however, expressed without considering all the relevant facts and legal requirements, more harm than good might be inflicted on all parties involved, despite our best intentions. The acts of taking personal responsibility to promote our own best interests and to meet our legal obligations in protecting our rights cannot be replaced by popular opinion.
* Ladouce is a pension funds lawyer and the author of the book, Pensions for Palookas.
PERSONAL FINANCE