A Critical Discussion of a Pension Interest as an Asset in the Joint Estate of Parties Married in Community of Property

Abstract

It is fundamentally important for persons married to each other to understand their rights and obligations in such a union, more particularly when they are married in community of property. Spouses should understand what constitutes a joint estate and fully be aware of all the assets thereto so as to know their rights and how to protect them. This can be crucial more so when parties contemplate divorcing each other. South African courts granting a decree of divorce have the power to make orders regarding assets of the marriage. As such, if there is no direction from the parties as to how the assets should be dealt with, as far as marriages in community of property are concerned, the court can order that the parties share the assets equally. After the 1989 amendments to the Divorce Act 70 of 1979 (hereinafter referred to as DA), amounts either awarded or to be awarded by retirement funds to their members have proved to become important assets in marriages in community of property. Before these amendments, the pension interest which non-member spouses would be entitled to on divorces was not regarded as forming part of the joint estate of spouses married in community of property. Section 7 (7) (a) of the DA 70 of 1979 provides that when determining patrimonial benefits to which parties involved in divorce litigation may be entitled to, the pension interest of the party who is a member of the pension fund shall be deemed to be part of such a party‟s assets. Furthermore, in terms of section 37D (4) (a) 2 of the Pension Funds Act 24 of 1956 (hereinafter referred to as PFA), the portion of the pension interest assigned to the nonmember spouse in terms of a decree of divorce or decree for the dissolution of a customary marriage granted in accordance with section 7 (8) (a) of the DA is deemed to accrue to the member on the date on which the decree of divorce or decree for the dissolution of a customary marriage is granted.3 However, despite these statutory provisions, which one might be inclined to argue that they are clear if interpreted literally, nonetheless, there has been confusing and inconsistent approaches from our courts as to when does the pension interest accrue to the joint estate.4 In this paper, I will be arguing that section 7 (7) (a) of the DA is ambiguous and has been a major source of conflicting decision from various divisions of the High Court in South Africa and thus needs to be amended to be able to properly guide our courts when adjudicating on this issue. Furthermore, I will be advancing an argument that a pension interest should not be deemed to be an asset in the member party‟s estate but rather should be regarded as an asset which falls automatically into the joint estate of parties married in community of property immediately when the marriage comes into being. This paper will however, not discuss tax implications and perceived discriminatory consequenceswhich are likely to arise in the area of South African Divorce Law.