Setting the record straight
Our recent article on the Pension Funds Adjudicator, Momodupi Mohlala’s landmark determination “that the new amended provisions [as promulgated in the Pension Funds Amendment Bill] applied to all divorces whether concluded prior to or after 13 September 2007,” stirred up a hornets nest.
We have to accept responsibility for this as we published a knee-jerk reaction to the news that Old Mutual did not believe the provisions applied retrospectively. We felt the company’s stance that fund administrators and intermediaries seek declaratory guidance from the High Court in individual cases amounted to delaying tactics.
The truth is the matter is more complex than we initially thought – and we have to thank the many readers who wrote in to set the record straight. In today’s newsletter we focus on Old Mutual’s response to the article, and share some of our reader’s views.
Old Mutual takes strong exception…
“We take exception to the reference by FAnews Online that we are not willing to comply with the spirit of the law and the implication by the publication that we are trying to hold on to pension assets of fund members to the detriment of divorced spouses of members of our funds,” begins the Old Mutual release.
Old Mutual says that their interpretation (and that of several lawyers) is that the Pension Funds Act fails to bear out the legislators’ intentions. So while they are sympathetic to the situation that non-member spouses find themselves in, they believe the current legislation applies to awards made prior to 13 September 2007, and will continue to advise funds to exercise their fiduciary duty to fund members.
Until further legislation is passed (and there is no guarantee this will happen) Old Mutual has to consider its options. These, says Old Mutual, include “for us to obtain instructions from funds under our administration to approach the High Court for a declaratory order requesting guidance on how to apply the legislation. Whilst we are doing more research into the matter, Old Mutual will not be able to entertain any claim for immediate settlement for non-member spouses who were divorced before 13 September 2007 until further clarification.” Click here for Old Mutual’s full response.
Legislators and not insurers to blame
After reading Old Mutual’s submission and the various responses from our readers we must concur that the legislation is incomplete. The following excerpts from reader responses are a good indication of the consensus:
Reader 1: “I am disappointed that the legislators have not looked at all the corners, when putting down the amendment, surely they should have done that or don’t they have enough resources?”
Reader 2: “I think all in the industry would welcome changes to legislation to correct this situation, but until that happens, fund trustees will have difficulty in applying the provisions of the divorce amendment.”
More care required before making determinations
A number of readers also felt it was unwise for the Pension Funds Adjudicator to have issued such a determination in light of the legislative situation. These views include:
Reader 3: “Sadly this is another case where the ruling and its implications were NOT thought through properly, nor investigated.”
Reader 4: “This new legislation - as with most of the Pensions Fund Adjudicator’s latest rulings - will have unintended consequences which, in hindsight, were entirely foreseeable.”
Taking it on the chin
And we deservedly fielded a few tough comments for bashing Old Mutual.
Reader 5: Your attack on Old Mutual is unwarranted (this time). It has nothing to do with the unwillingness to part with money. In no system can legislation arbitrarily be interpreted to meet some intangible spirit of the law.
Reader 6: “I despise the attitude at which you made reference to Old Mutual and their stance on the amendment of this Act.”
Reader 7: “Your comment that “The Pension Funds Amendment Bill is clearly intended to be applied retrospectively” is astounding, if one considers that the Legislature saw it necessary to specifically declare some sections to have retrospective effect.”
Our readers don’t pull any punches when we get things wrong. Click here to read detailed reader responses.
Editor’s thoughts:
For the time being, non-member spouses hoping to receive their portion of member funds awarded in divorce settlements will have to bunker down while the legislators and courts flesh out the details. We would love to hear further comments on the matter – particularly if you have taken the time to read both Old Mutual and our reader’s responses. Send your comments to [email protected]
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