Changes to Pension Fund Act have brought benefits
AS A RESULT of changes to the Pension Funds Act a spouse may immediately become entitled to part of the other's retirement savings, so it is prudent for couples to consider this when reviewing their retirement savings.
Whether the spouse is indeed entitled to such a share and the extent of such a share depends on the provisions of the relevant divorce order.
The right to claim applies only to couples married in community of property or out of community of property with accrual. Couples married out of community of property without the accrual are not affected.
Before the changes nonmember spouses could access their portion of a former spouse's retirement benefits only when the member left the fund, for example on retirement, death, resignation, retrenchment or dismissal, no matter how long after the divorce that occurred.
Because the spouse did not receive any investment growth on the share awarded, the situation was potentially highly inequitable. The amended legislation addressed this inequitable situation by ensuring that ex-spouses could claim the award immediately.
The member spouse can elect to receive payment of the divorce award in cash or transfer it to another retirement fund. Various tax scenarios apply when the divorce award is taken in cash by the nonmember spouse, depending on the date of divorce or when the nonmember elects to receive his-her divorce award.
It is therefore advisable to consult your financial adviser or broker for advice in this regard.
When you receive this payment, it is absolutely key that you invest it wisely to provide for growth and an income for you at retirement.
Importantly, you will also need to supplement any shortfalls that may occur into the future by taking immediate action to complete retirement plan for yourself.
It is important to note that as the nonmember spouse it is your responsibility to initiate the claim process.
Steps to follow in acquiring your divorce award:
The fund will require the following in order to effect payment to the nonmember spouse:
l A certified copy of the divorce order;
l A formal request in writing to pay the award in cash or transfer it to another retirement fund; and
l Details of the fund or payment details to enable the fund to give effect to the order, failing which the fund may retain the money.
Nonmember spouses should provide full names, address, contact phone numbers (especially cellphone numbers), policy numbers and bank account details.