18 September 2025
The matrimonial regime under which a couple is married could affect whether retirement savings are available for distribution, if their marriage ends in a divorce. It is imperative for financial advisers to know these regimes and their implications for retirement savings when building a holistic financial plan for their clients.
The definition of pension interest since 1 September 2024
Implementation of the Two-Pot Retirement System has helped us get to a simpler definition for ‘pension interest’.
The amended definition of pension interest in the Pension Funds Act became effective after the Two-Pot System was implemented and has been a blessing in disguise for retirement annuity fund members, in particular.
Although the definition for pension interest in the Divorce Act has not been amended to match the one in the Pension Funds Act, the definition in the latter has overriding authority in terms of the law.
What is pension interest?
Pension interestas a concept, refers to the amount linked to retirement fund membership, that may actually be considered the member’s asset when that member gets divorced. The necessity for the concept comes from the fact that when an individual becomes a member of a retirement fund, that individual’s ability (and right) to just access their savings in the retirement fund, at any time, becomes contractually limited. The savings of a retirement fund member, in that fund, does not legally form part of the member’s personal whilst it is in the fund. The member contractually has rights to the benefits the retirement fund offers, but not to the actual savings at choice. The benefits that a retirement fund offers, is based on the value of the savings at certain times or events.
This is why the member’s savings, in principle, does not form part of his/her personal that may be divided at divorce. Consequently, it is necessary to ‘make’ the savings available at divorce for the purposes of fairness i.e. a possible distribution of , that include retirement savings, between divorcing spouses. Obviously, this is only if a divorce court orders that as a fair outcome.
How to calculate the value of pension interest
The new simplified meaning of pension interest is that it refers to ‘the value of a member’s individual account or reserve in their retirement fund, as at the date of the divorce court order’. In other words, the member’s fund value or the savings allocated to the member in the fund.
This new meaning applies, whether the retirement fund in question is a pension, provident, pension preservation, provident preservation or retirement annuity fund. The silver lining here is that prior to Two-Pots, pension interest in a retirement annuity fund specifically, required an actuarial calculation. The value of pension interest was calculated by adding annual simple interest to all the contributions into the retirement annuity fund up to the date of divorce. The interest rate itself was determined by the Minister of Justice from time to time.
Luckily now, the value of pension interest is the same simplified value for all.
Marital regimes and pension interest
One could be wondering at this point how it is possible that the law can determine that retirement savings must be available for sharing at divorce when one chooses at the onset to share, or not, in each other’s during a marriage.
The type of marriage entered into, and the applicable matrimonial regime, affects the availability of pension interest in a divorce court. Here is a list of matrimonial regimes and the inherent implications for pension interest:
- Civil marriages and civil unions are either in community of property or out of community of property (with or without the accrual).
- In community of property means that the pension interest of spouses automatically forms part of their joint estate. Consequently, the divorce court can divide the pension interest of both spouses as they deem fit.
- Out of community of property with accrual means that pension interest forms part of the personal estates of both spouses and is part of the accrual calculation. This means that there is a sharing of pension interest in terms of the logic of the accrual regime.
- Out of community of property without accrual means that there is no obvious sharing of personal at divorce, not even pension interest. But a divorce court can order this sharing in terms of Section 7(3) of the Divorce Act, or the spouses can agree to share it in a settlement agreement.
- Religious marriages i.e. concluded in terms of the tenets of a religion, are also recognised under the law. The new definition of pension interest specifically makes provision for these types of marriages. In such cases, a court may order a sharing of pension interest between the spouses as they deem fit (a division of ).
- There is no formal common law marriage concept in South African law. The dissolution of a common law or co-habitation relationship will not have formal financial and property results. This means that the parties will have to agree, but no court can order a sharing of their pension interests.
- Customary marriages are registered in terms of the Recognition of Customary Marriages Act in South Africa. The applicable matrimonial property results are complicated. Simply put, such a marriage is generally in community of property when monogamous. Should the marriage become polygamous, the property system is regulated by agreement and formal requirements. Should these fail, the courts have found that the marriage will then be out of community of property. In a worst-case scenario for sharing in pension interest, such a marriage follows suit with an out-of-community-of-property regime where there is no obvious sharing of personal at divorce, not even pension interest. But a divorce court can order this sharing in terms of Section 7(3) of the Divorce Act, or the spouses can agree to share it in a settlement agreement.
Valid divorce court orders are still required
Irrespective of the applicable regime or the meaning of pension interest, a retirement fund will only pay an amount to a non-member spouse in terms of a court order, and if the order is legally valid.
Requirements for a valid and enforceable court order are as follows:
- The retirement fund (name and registration number) must be clearly identified.
- The order must state the wording ‘pension interest’.
- The order must confirm how much of the pension interest (rand value or a percentage value) is awarded to the non-member spouse.
- The order must expressly order the retirement fund to pay to the non-member spouse.
