Pension fund enforced a defective court order

Muvhango Lukhaimane, Pension Funds Adjudicator.

A “large and experienced” player in the pension industry should have known better than to have enforced a defective court order, says the Pension Funds Adjudicator.

Muvhango Lukhaimane said that in giving effect to a defective court order that was non-compliant with the provisions of the Pension Funds Act and the Divorce Act, Metropolitan Retirement Annuity Fund was abetting the transgression of legislation and a court order.

Ms Lukhaimane’s criticism stemmed from a matter in which Ms KJ Guild (complainant) claimed she was unhappy with the payment of pension interest following her divorce.

The marital bond between the complainant and her former spouse was dissolved in terms of the divorce order issued on 29 November 2013 by the Southern Gauteng High Court in Johannesburg.

The relevant part of the settlement agreement which was made an order of the court was that the proceeds of a retirement annuity policy in the former spouse’s name be paid to the complainant upon maturity on 1 April 2018.

The complainant submitted that she was dissatisfied with the amount of the pension interest paid to her. She said the value of the policy amounted to R204 171. However, she was only paid an amount of R138 573 which, she said, was not in accordance with the divorce order.

She further stated that she was informed by MMI Group Limited (second respondent) that the first respondent could not pay her the entire amount in terms of the Divorce Act.

In its response, the second respondent said that the divorce order that was granted, could not in its present wording be made enforceable against the first respondent because in terms of the Divorce Act, the fund may only assign the maximum of pension interest contained in the fund calculated at the date of divorce.

It submitted that to alleviate the complainant and the former spouse from redrafting the settlement agreement at great cost, the first respondent requested the parties to sign an amendment to the agreement to give effect to their intentions that the non-member spouse obtains the maximum value in the fund.

In this regard, it referred to the letter dated 11 March 2015 in terms of which the parties recorded that 100% of the pension interest be assigned and paid to the complainant.

Therefore, the first respondent could not pay the whole benefit but only 100% of the value of the pension interest calculated up to the date of divorce, i.e. 20 November 2013, in accordance with legislation.

In her determination, Ms Lukhaimane said in terms of the Divorce Act the divorce benefit accrues to the non-member spouse on the date of divorce.

She said the in terms of the decree of divorce granted to the complainant, the paying spouse had authorised Momentum Life to pay the full proceeds of the policy to the complainant on maturity of the policy on 1 April 2018.

She said the divorce order did not comply with the requirements of the Divorce Act as it facilitates cession of the pension proceeds.

“The divorce order also fails to mention that the records of the first respondent must be endorsed to reflect and confirm that a percentage of the pension interest held in the first respondent must be paid to the complainant and calculated as at the date of divorce, which is also not in line with the provisions of the Divorce Act.

“Further, the divorce order does not specifically order the first respondent to pay pension interest to the complainant, which is also at odds with the provisions of the Divorce Act.

“The complainant submits that Mr Guild’s fund value amounted to R204 171. However, the first
respondent only paid her an amount of R138 573 and thus she is of the view that the first respondent 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.”

Ms Lukhaimane said the first respondent paid 100% of the proceeds to the complainant and not the pension interest as required in terms of the Act.

She was critical of the first respondent’s submission that it noted that the divorce order was not compliant with the Divorce Act and Pension Funds Act . However to assist the parties and alleviate them from redrafting the settlement agreement, the first respondent requested the parties to sign an amendment to the settlement agreement in order to give effect to their intentions that the non-member spouse obtains the maximum value in the fund.

“This Tribunal views the first respondent’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 second respondent 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.”

In the circumstances, the complaint was dismissed.