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Government Employees Pension Fund changes divorce “debt” rules

Government pension fund members will no longer accrue pension debt after a divorce settlement payout

Government pension fund divorce rules have changed

We’ve written about divorce and pension sharing recently. It can be the most contentious aspect of a divorce, particularly where one partner is a high earner and the pension fund represents a significant asset. It can be particularly emotive because, unlike a residence, which is a shared asset to which both spouses have contributed, a pension is the fruit of one’s own labours – an occupational pension fund is effectively deferred income. However, where the marriage is in community of property, the pension is an asset to be shared on divorce. The process can be complex. It is not a simple as valuing a house and selling it to split the proceeds or one spouse buying out the other’s share. The Government Employees Pension Fund has recently simplified its rules around divorce and pensions, as this article from the Sowetan Live explains:

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The Government Employees Pension Fund (GEPF) will no longer subject its members to a so-called “debt” approach when implementing a divorce settlement court order.

Instead, on divorce, a member’s contributing years of service will be reduced by the number of years equal to the portion of benefit due to a spouse in terms of the divorce order.

The new rules came into effect on August 1 2019, after the gazetting of the Government Employees Pension Law Amendment Bill on May 23 2019.

The amendment removes the pension debt that accrued to GEPF members when, as stipulated by their divorce settlements, the fund paid out part of their pension to their former spouses.

This created the possibility that such members could owe money to the GEPF when they retired.

Policy adjustment

Now, rather than creating a debt, the GEPF will adjust a member’s years of pensionable service after it has paid the amount required by the divorce settlement.

This means the benefit to be paid to that member upon retirement will be decreased to take into account the part of the member’s pension interest given to the spouse during the divorce. The member will therefore receive his or her full benefit after the reduced pensionable service has been calculated.

As an example, a member who has 20 years of service and whose spouse is paid 50% of the pension fund interest would have his or her years of service reduced to 10 years. To address the gap, that member could then opt to pay in the difference or raise his or her monthly contributions.

Members who have more than 10 years of pensionable service prior to the divorce claim will still be entitled to a lump sum and a monthly pension when exiting the fund – though at a reduced value.

Previous divorce settlements

Members who already had their divorce settlements processed in terms of the previous “debt” approach can switch to the new service-reduction model.

These members have until May 22 2020 to indicate their choice. If they fail to indicate their choice, they will automatically be converted to the new approach.

The GEPF will send information about these options to all affected members to explain how the changes will affect their pensionable service periods and benefits.

This article was paid for by the Government Employees Pension Fund and is reprinted from Sowetan Live

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If you’re considering divorce and are worried about your pension, we can help

Contact Simon on 086 099 5146 or email sdippenaar@sdlaw.co.za to discuss your case in confidence. SD Law and Associates are experienced family law attorneys who will look after your interests and ensure a fair settlement that respects all parties.

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The information on this website is provided to assist the reader with a general understanding of the law. While we believe the information to be factually accurate, and have taken care in our preparation of these pages, these articles cannot and do not take individual circumstances into account and are not a substitute for personal legal advice. If you have a legal matter that concerns you, please consult a qualified attorney. Simon Dippenaar & Associates takes no responsibility for any action you may take as a result of reading the information contained herein (or the consequences thereof), in the absence of professional legal advice.