Eskom Pension and Provident Fund v Krugel

Mr PJ Krugel resigned from his employment with Eskom on 31 January 1993 and elected to defer his pension benefit in accordance with Rule 30(2) of the Fund's rules, thereby becoming a deferred pensioner. He and the first respondent, Mrs Elizabeth Maria Krugel, were divorced on 14 September 2001. A settlement agreement made an order of court recorded that the first respondent was entitled to 25% of Krugel's pension interest with the Eskom Pension Fund, payable when Krugel became entitled to the pension benefits. However, the Fund refused to register the required endorsement on the basis that the divorce was granted after Krugel had already elected to become a deferred member and no longer had a pension interest as contemplated in the Divorce Act 70 of 1979 read with s 37D of the Pension Funds Act 24 of 1956. The first respondent lodged a complaint with the Pension Funds Adjudicator who found in her favor. The Fund sought to review this determination, but the South Gauteng High Court (Lamont J) dismissed the application. The Fund appealed to the Supreme Court of Appeal.

• Whether the provisions of sections 7(7) and 7(8) of the Divorce Act 70 of 1979 entitle a non-member spouse to receive benefits from a pension fund where the member spouse had resigned from employment before the date of divorce but deferred his benefit in the pension fund
• Whether a deferred pensioner still has a 'pension interest' for purposes of the Divorce Act after resignation but before divorce
• Whether section 37D(6) of the Pension Funds Act applies to a deferred pensioner who is not a member of a preservation fund
• The interpretation of 'pension interest' as defined in section 1(1) of the Divorce Act

The appeal was upheld with no order as to costs. The order of the court below was set aside and replaced with an order setting aside the Pension Funds Adjudicator's determination (reference number PFA/GA/10192/2006/SM made on 11 December 2009) and dismissing the first respondent's complaint.

A person who has resigned from employment and elected to become a deferred pensioner before the date of divorce no longer has a 'pension interest' as defined in section 1(1)(a) of the Divorce Act 70 of 1979 for purposes of sections 7(7) and 7(8) of that Act. The pension interest, being a benefit determinable at the time of resignation, had already become payable before the divorce and therefore cannot again be deemed to become entitled to a resignation benefit on the date of divorce. Once the pension benefit has accrued (i.e., beyond the date of divorce), the pension interest converts into a pension benefit and the provisions of sections 7(7) and 7(8) of the Divorce Act are no longer applicable. Section 37D(6) of the Pension Funds Act 24 of 1956 applies only to members of preservation funds and does not extend the definition of pension interest to deferred pensioners who are not members of such funds. An order under section 7(8)(a) of the Divorce Act assigning part of a pension interest to a non-member spouse is not competent where the member spouse had resigned and deferred benefits before the date of divorce.

The court observed that this finding does not leave the first respondent without remedy. The divorce settlement agreement between her and Krugel (who undertook to give on demand any assistance needed in connection with its enforcement) remains binding. It is therefore open to her to claim her share of his deferred pension benefit when it is claimed by him after reaching the age of 55 years. This suggests that while the statutory mechanism under the Divorce Act and Pension Funds Act may not be available in these circumstances, contractual remedies arising from the divorce settlement agreement remain enforceable.

This case provides authoritative guidance on the interpretation and application of sections 7(7) and 7(8) of the Divorce Act 70 of 1979 and section 37D of the Pension Funds Act 24 of 1956 in circumstances where a member spouse resigns from employment and defers pension benefits before divorce. It clarifies that 'pension interest' for purposes of division on divorce only exists where the member spouse is still in employment (or has not yet resigned) at the date of divorce. The case establishes that once an employee has resigned and elected to defer pension benefits, the pension interest has already crystallized and is no longer available for division under the specific statutory provisions governing pension interest on divorce. It is an important precedent for pension funds, divorce practitioners, and spouses seeking to claim portions of pension benefits on divorce, particularly in understanding the temporal limitations of the pension interest provisions.