Settlement order must comply with Divorce Act

Pension Funds Adjudicator Muvhango Lukhaimane

Lukhaimane has upheld a complaint by a Mr P (name withheld) who alleged that Sentinel Mining Industry Retirement Fund (first respondent) had paid Ms M (second respondent - name withheld) her pension interest calculated from the date of his membership to date of divorce.Mr P submitted the first respondent had failed to carry out the divorce order which provided that the pension interest payable should be calculated from date of marriage to date of divorce.

The complainant was initially a member of the Mine Employees' Pension Fund from 1 August 1995 until 31 January 2008. With effect from 1 February 2008, the complainant was transferred to the first respondent. The complainant was married to the second respondent on 11 November 2004. Divorce proceedings were instituted in the North Gauteng High Court. The court granted a decree of divorce on 20 February 2012 in terms of which provision was made for the payment of pension interest to the second respondent.

Change in conditions of employment

A section of the divorce settlement agreement reads as follows ".....the plaintiff is entitled to 50% of the Defendant's pension interest, rights or benefits held at the Sentinel Mining Industry Retirement Fund from date of marriage to date of divorce...." In its response, the first respondent submitted that the complainant was a member of the Mine Employees' Pension Fund from 1 August 1995 until 31 January 2008.

Due to a change in his conditions of employment, from 1 February 2008 he became a member of the first respondent. An amount of R718 153.28 was transferred to the first respondent on 22 April 2008 but the effective date was 1 February 2008. As this transfer occurred after the date of marriage, it formed part of the complainant's fund credit in the first respondent.

The first respondent further submitted that the date of marriage did not affect the calculation in this instance as the complainant was not a member of the first respondent as at date of marriage. The complainant's pension interest was thus calculated for the period 1 February 2008 to 20 February 2012. The date of marriage would have made a difference to the calculation of the pension interest only if the marriage had occurred after the transfer of the complainant's fund credit from Mine Employees Pension Fund MEPF.

Calculation of interest

In her determination, Lukhaimane said the issue that fell to be determined was whether or not the pension interest paid to the second respondent by the first respondent was calculated in terms of the divorce order. She said pension interest was defined in the Divorce Act as the sum total of benefits up to the date of the divorce.

The first respondent calculated the second respondent's pension interest as at date of divorce, which was correct in terms of the definition of pension interest in the Divorce Act. However, this was not what the settlement agreement that was part of the divorce order provided for. The settlement order provided for payment of the pension interest to the second respondent calculated from date of marriage to date of divorce.

Lukhaimane said the settlement order did not comply with the definition of pension interest and thus was not enforceable by the first respondent as it would have amounted to an unlawful reduction of a pension benefit. "Pension interest is an amount equal to the member's cash resignation benefit which would have become payable had the member resigned as at date of divorce and has no bearing on the date of marriage as such.

Incorrect interpretation

"Therefore, it was incorrect of the first respondent to interpret the settlement agreement to mean that the second respondent was to be awarded 50% of the complainant's pension interest calculated from date of membership to date of divorce, when it expressly states something to the contrary.

"The transfer amount that was received by the first respondent from the previous fund after the date of marriage, does not cure the fact that the provision for pension interest in the settlement agreement sought to define pension interest in a manner contrary to what the Divorce Act states. The first respondent ought to have consulted the parties concerned when it was faced with this inconsistent settlement agreement in order to allow them an opportunity to approach the court with a view to amending the order or simply refused to enforce it by reason of its inconsistency and vagueness,"' said Lukhaimane.

Lukhaimane ordered that the decision of the first respondent to pay 50% of the complainant's pension interest to the second respondent be set aside. The first respondent was ordered to reimburse the complainant by crediting his fund value with the amount of the 50% pension interest that was deducted from his fund credit.