Pension fund in trouble over divorce order
A "large and experienced" player in the pension industry should have known better than to have enforced a defective court order.
|||Cape Town - A "large and experienced" player in the pension industry should have known better than to have enforced a defective court order when dealing with a retirement fund member's benefits in a divorce settlement, the Pension Funds Adjudicator says.
In a determination handed down on March 24, the adjudicator, Muvhango Lukhaimane, says the Metropolitan Retirement Annuity Fund, which fell within the MMI Group, gave effect to a court order that did not comply with the Pension Funds Act or the Divorce Act.
The case arose from a complaint from Ms G from Johannesburg, who was unhappy with the amount she received from her husband's retirement annuity fund (RA) after their divorce in November 2013. The couple's divorce settlement was made an order of the Southern Gauteng High Court. In the settlement, Ms G's husband ceded an RA policy to her. The policy was due to mature in April 2018, and Ms G would have received the proceeds.
However, the Divorce Act stipulates that such a policy cannot be transferred or ceded under a divorce agreement. The amount owing to the non-member spouse, as calculated on the date of divorce, must be paid out there and then.
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In its response to the complaint, MMI said that, to save Ms G and her former husband from having to redraft the settlement agreement, at great cost, the RA fund had asked the parties to sign an amendment to their agreement so that Ms G could be paid out the maximum value of the fund immediately. However, the RA fund could not pay the whole benefit but only 100 percent of the "pension interest", in accordance with legislation. "Pension interest" is defined in the Divorce Act as the sum of the member's contributions to the date of the divorce plus simple interest according to a prescribed rate.
In her determination, Lukhaimane said that in terms of the Divorce Act the divorce benefit accrues to the non-member spouse on the date of divorce. She said the divorce order did not comply with the requirements of the Act, as it facilitated cession of the policy.
"The complainant submits that the fund value amounted to R204 171. However, the fund paid her an amount of only R138 573, and thus she is of the view that the fund failed to adhere to the divorce order.
"It is clear from the definition of pension interest in terms of the Divorce Act that a non-member spouse is only entitled to pension interest constituted of total contributions up to the date of divorce plus a total amount of annual simple interest on those contributions up to that date.
"This tribunal views the Metropolitan Retirement Annuity Fund's conduct of giving effect to a defective order which is non-compliant with the provisions of the Pension Funds Act and the Divorce Act, as abetting the transgression of legislation and a court order and deserving of deprecation.
"As a large and experienced player in the industry, the MMI Group should have considered that enforcing an invalid court order impacts on its seriousness to champion governance and compliance within its operations.
"Unfortunately, the horse has bolted as the complainant has already been paid the proceeds of the pension benefit. This tribunal cannot aid any of the parties herein as the divorce order is non-compliant with legislative prescripts," Lukhaimane said.
In the circumstances, the complaint was dismissed.
PERSONAL FINANCE