A case that came before the Financial Services Tribunal has underscored the importance of ensuring that divorce settlements conform to the provisions of the Pension Funds Act and the Divorce Act when addressing the apportionment of a pension interest.
The applicant was married to the fund member for almost 30 years. He took out two retirement annuities, of which she was made the beneficiary.
When they divorced, the settlement agreement, which was made an order of court, included a clause stating that when the RA matured, the ex-wife “shall be entitled to 50% of the maturity benefit/value of the RA as at the date of maturity” (tribunal’s emphasis).
The fund member remarried in 2016, and in May 2018 amended his beneficiary nomination to make his new wife the sole beneficiary of his death benefit.
The fund member died in June 2018, and in March 2020 the fund’s trustees resolved to allocate the entire death benefit to his widow.
The ex-wife complained to the PFA in May 2020.
The Adjudicator, after considering the relevant clauses of the settlement agreement and the definition of “pension interest”, concluded that the ex-wife was seeking to have the divorce order amended so that the fund could give effect to it. The Adjudicator also decided that she cannot amend a court order, because this does not fall within the definition of “complaint” in the PFA. Therefore, the complaint was dismissed.
In terms of the Divorce Act, an RA member’s pension interest is his or her total contributions to the fund “to the date of the divorce, together with a total amount of annual simple interest on those contributions up to that date”.
The ex-wife asked the tribunal to have the PFA reconsider its determination. She contended that:
- The Adjudicator must apply, where appropriate, the principle of equity as envisaged by section 37D(2)(a) of the PFA.
- Her total circumstances were not considered, including her age, the duration of the marriage, her health condition, and that one of her major children was dependent on her.
- The proceeds of the policies should be split 50/50 between her and her ex-husband’s widow.
But the tribunal said it could not fault the Adjudicator’s determination.
It was not contested that the settlement agreement did not fall within the ambit of section 37D(4)(a) of the PFA and section 7(8) of the Divorce Act, read with the definition of “pension interest”.
“The record shows that the applicant [must] have been fully aware of this legal obstacle way before approaching the offices of the Adjudicator.”
The tribunal said neither the Adjudicator nor the fund could be encouraged to exercise more power than what the law requires of them.
In addition, it saw no basis in law to consider the applicant a dependant when it had not been provided with any information that defined her as such in terms of the PFA.