Johannesburg — A LANDMARK ruling by pension fund adjudicator Mamodupi Mohlala is likely to affect thousands of divorced spouses awaiting payment of the divorce benefits from various retirement funds.

Mohlala has ruled that, following the promulgation on September 13 of the Pension Funds Amendment Act, benefits are deemed to "accrue" to the member on the date of the court order of divorce.

Previously, under the Divorce Act, pension benefits were paid out to the non-member spouse only when the benefits accrued, usually on retirement.

The ruling was made last week in the matter of J Cockcroft and the Mine Employees Pension Fund, where the complainant was the former spouse of a member of the fund.

The complainant was divorced on July 7 2003 in terms of an order handed down by the Southern Divorce Court, which provided the complainant shall be entitled to 50% of her former husband's pension interest in the fund.

In addition, this amount had be paid to her on the finalisation of the divorce proceedings or when the benefit accrued.

The fund refused to pay the benefit and argued that, in terms of the then applicable legislation, the benefit could be paid only once the benefit accrued to the principal member.

It said that, as the benefit had not yet been paid to him, his former spouse was not entitled to the divorce benefit.

Mohlala acknowledged that, in terms of the law as it stood before September 13, a court granting a divorce order may make an order that a share of the pension interest be allocated to the non-member spouse and that such amount be paid by the fund to the former spouse when any pension benefits accrued in respect of the pension fund member.

The effect of this statutory provision was that the non- member spouse could receive payment of the pension interest only when the benefit accrued to the member spouse.

"As to when the benefit accrues to the member, this is normally determined in terms of the rules of the fund and is usually linked to the termination of the employment contract... .

"Thus, in light of Mr Cockcroft still being a member of the fund and to date not having received his benefit, in terms of the Divorce Act the complainant was not entitled to the payment of a divorce benefit," she said.

But she said with effect from September 13, the legislature sought to address this problem by amending the Pension Funds Act and, in particular, inserting a new sub-section in terms of which, with regard to the payment of divorce benefits, the pension benefit is deemed to accrue to the member on the date of the court order. The adjudicator held that the effect of the new section was to accelerate the date of accrual of the benefit to the member spouse and in turn the date on which the divorce benefit accrues to the non-member spouse.

The result is that the divorce benefit accrues to the nonmember spouse on the date of divorce.

"Thus, from this date onwards, the non-member spouse is entitled to have the divorce benefit disinvested from the fund portfolios and paid or transferred to another fund or to him or her," Mohlala said.