The respondent (Ms Swemmer) was married in community of property to Dr Swemmer. On 20 September 2001, the High Court granted a divorce order which included provisions purporting to award the respondent sole ownership of certain retirement annuity policies held by Dr Swemmer and ordering the insurance companies (the appellants) to pay the proceeds directly to her. Three retirement annuity policies were involved: two underwritten by Old Mutual through SARAF (South African Retirement Annuity Fund) and one by Sanlam through the PPS Fund. Dr Swemmer, who had moved to Australia, turned 55 (the earliest age at which benefits could be called up) on 2 December 2001, but the agreed maturity dates were still years away (2007 and 2016). The appellants refused to pay, arguing the divorce order conflicted with statutory provisions. The respondent applied to the High Court to compel payment. The court a quo (Botha J) found in favour of the respondent, holding she was entitled to immediate payment and that the appellants lacked standing to challenge the divorce order. The appellants appealed.
The appeal was upheld. The order of the court a quo was set aside and replaced with an order dismissing both the application and the counter-application. No costs order was sought or made.
1. A 'pension interest' as defined in section 1(1) of the Divorce Act is a notional asset valued as at the date of divorce, calculated according to a fixed formula, and deemed to be part of the member spouse's assets for purposes of determining patrimonial benefits on divorce. 2. Any other 'right' or 'interest' which the member spouse may have in respect of unaccrued pension benefits is not to be regarded as an asset in the estate of the member spouse and cannot be the subject of a forfeiture order or division. 3. Section 7(8)(a) empowers the court to order that a portion of the pension interest be paid to the non-member spouse when pension benefits accrue to the member spouse in accordance with the rules of the pension fund, but does not empower the court to award ownership of the policy or membership in the fund to the non-member spouse. 4. The non-member spouse awarded a portion of the pension interest does not acquire the right to exercise the member spouse's rights under the pension fund rules, including the right to anticipate or postpone maturity dates. 5. The date when the pension interest becomes payable is determined by the rules of the pension fund governing the relationship between it and the member spouse, not by the non-member spouse or the divorce court. 6. A divorce order that purports to award ownership of retirement annuity policies to the non-member spouse and to compel immediate payment of proceeds before benefits have accrued under the fund rules is in conflict with sections 7(7) and 7(8) of the Divorce Act read with section 37A of the Pension Funds Act. 7. Such an order, being beyond the court's powers and made against parties (insurance companies/pension funds) not joined to the divorce proceedings, is a nullity as against those parties and may be legitimately disregarded without being set aside.
The Court observed that the provisions of sections 7(7) and 7(8) of the Divorce Act have given rise to difficult problems of interpretation and application, and noted that there is no provision for the pension fund to pay interest or capital growth on the portion of pension interest allocated to the non-member spouse from the date of divorce to the date of eventual payment (though parties may provide for this inter se by agreement). The Court also commented that the pension funds (SARAF and PPS Fund) should have been joined as parties to the proceedings given their direct and substantial interest in the subject matter, though they subsequently waived this right. The judgment emphasized the importance of deeds of settlement and divorce orders relating to pension interests being formulated very carefully to ensure they fall within the ambit of the statutory provisions, so that pension funds need only perform administrative functions to give effect to orders without their rights or relationship with the member spouse being affected.
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 their interaction with section 37A of the Pension Funds Act 24 of 1956. It clarifies the limited nature of a 'pension interest' as a notional asset valued at the date of divorce, distinguishes this from unaccrued pension rights, and establishes that courts cannot award ownership of retirement annuity policies to non-member spouses or empower them to exercise member rights such as anticipating maturity dates. The judgment emphasizes the importance of carefully drafting divorce orders concerning pension interests to ensure they comply with the statutory framework. It also addresses procedural requirements regarding joinder of pension funds. The case has become a leading authority on pension interest division in South African divorce law.