By Carlyle Field, Partner in the Employment and Pension Law Department

The Pension Funds Adjudicator recently determined that a retirement fund might potentially pay a share of a member's benefit to the member's former spouse on the dissolution of their Islamic marriage.  At first glance, this statement would appear to be a step in the right direction, particularly in the context of the recognition afforded to Islamic marriages by the Constitutional Court in Sachs J.’s judgment in Juleiga Daniels v Robin Grieve Campbell NO and Others, 2004.  There is still, however, a debate raging in the retirement fund industry as to whether this is permissible in terms of current legislation.

In Juleiga Daniels v Robin Grieve Campbell NO and Others, 2004, Sachs J. stated:

“I…do not agree that the two cases (National Coalition for Gay and Lesbian Equality and Others v Minister of Home Affairs and Others, 2000 and and Satchwell v President of the Republic of South Africa and Another, 2002) serve as authority for denying to parties to Muslim marriages the protection offered by the Acts (the Marriage Act 25 of 1961 and the Divorce Act 70 of 1979).”

The clear intention of the 2014 amendments to the Pension Funds Act was to allow a retirement fund to pay a share of a member's benefit to the member's former spouse on the dissolution of an Islamic marriage.  The wording of the amendments in section 37D(1)(d)(i) even goes so far as to clarify that such an order could be made either in terms of a decree of divorce granted in terms of the Divorce Act or in terms of another order of court.

The uncertainty arises because the other section of the Pension Funds Act that deems the portion of pension interest awarded to the non-member spouse to accrue to the non-member spouse on the date of divorce, only applies in respect of orders granted in terms of section 7(8) of the Divorce Act.  Islamic marriages are not subject to the provisions of the Divorce Act.  This means that it is not possible to obtain an order (against a retirement fund in respect of the payment of pension benefits on the dissolution of a marriage) in terms of section 7(8) of the Divorce Act in respect of the dissolution of an Islamic marriage. 

The same difficulty arises in respect of the payment of a divorce benefit by a retirement fund by way of deduction from a pensioner's total benefit.  The legislature hastily amended the Pension Funds Act in 2014 in order to make such orders permissible.  However, such orders are not possible under the Divorce Act, because a pensioner cannot have a "pension interest" (which is required in terms of section 7(8) of the Divorce Act and defined with reference to a future resignation benefit).

As already mentioned, the Pension Funds Adjudicator has recently determined that the intention of the legislation in amending certain provisions of the Pension Funds Act (in order to permit a fund to pay a share of a member's benefit to the member's former spouse on the dissolution of an Islamic marriage) must be given effect to despite the fact that further amendments to that Act and associated legislation are required to bring such payments in line with the letter of the law.  It is likely that this reasoning will also be extended to divorce orders relating to a lump sum payment from a pensioner's pension benefits if such a case comes before the office of the Pension Funds Adjudicator. 

Retirement funds and their administrators will now be wondering whether to follow the purposive interpretive approach of the Pension Funds Adjudicator or whether to follow the strict legal approach (and decline to give effect to an order that is outside the parameters of parts of the current legislation, even though it may be supported by other more recently enacted provisions). It is also important to note that the determinations of the Adjudicator do not constitute legal precedent.  Until there is legal certainty, our advice is to take certain practical steps in order to manage the consequences of the current legislative inconsistencies.