The Two-Pot Pension System and divorce

The new Pension Funds Amendment Act 31 of 2024 (“PFAA”) that was recently signed into law not only introduces far-reaching consequences in respect of pension funds but also impacts the position of pension interest and divorce. In this article, we look at some of the key impact areas of the PFAA in respect of divorce. 

Before the PFAA it has been a well-established principle in our law that a divorce order is only enforceable against a pension fund as long as the member is still a member of the fund. Now with the introduction of the PFAA and the two-pot retirement system and accompanying insertion of the definition of ‘pension interest’, the PFAA allows for a non-member to claim from the pension fund of a member irrespective of his/her membership status with said pension fund. 

The operation of the two-pot system provides for the division of one’s fund into two separate categories namely a retirement pot and savings pot. An additional category, the vested component retains all retirement savings up until 31 August 2024. The introduction of the savings withdrawal benefit allows a member to access the funds in the savings pot once in every tax period. The retirement pot will however remain untouched until the member is released from the fund due to retirement, death or ill health.

Once a pension fund receives a divorce order mandating the payout of a sum of money to a non-member spouse the fund will reduce each component of savings, retirement and vested pot proportionally. The PFAA further provides that should a member wish to withdraw from his savings pot while divorce proceedings are underway, the other spouse’s consent must first be sought. This is materially different from the previous position where pension funds would pay out without the other spouses’ consent with the only remedy being an urgent interdict against the pension fund to retain the funds pending finalisation of the divorce. How this will all unfold in practice, will depend on the rules of the various funds. 

The amendments introduced by the PFAA will raise questions regarding all pending divorce cases where the pension interests of spouses are involved in the division of the marital estate. It may therefore be advisable to consult with your attorney or family law expert regarding the implications of your divorce. 


Disclaimer: This article is the opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

Source: SeymoreDuToit & Basson

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