The Government Employees Pension Fund (GEPF) has introduced a rule amendment to their fund introducing the clean break principle on 1 April 2012. The rule amendment has enabled a non-member spouse to receive their portion of the pension interest, as per the court’s decision, in cash or allows for transfer to an approved fund Preservation Pension Fund.
The following wording has to be in the settlement agreement before the GEPF will pay your claim:
- The percentage that you are entitled to, for example 60% or 50%.
- The name – Government Employee Pension Fund – must be listed.
- By adding your spouse’s pension reference number also ensures a valid claim.
“The new rules state that on the date of payment of a divorce benefit the GEPF will create a debt, against the member equal to the amount payable to the non-member spouse. The amount will, accrue interest, up until the member exits the Fund (and it will be reduced to the extent that the debt, is partially repaid over the member’s remaining period of service in the Fund). At the date of the member spouse’s exit from the Fund the total value of the benefit will be determined, and will then be decreased by the outstanding amount of debt owed.”
- This debt will be calculated at a rate of 8% (repo rate) and this loan will be deducted from the retirement value at retirement age. You could either re-pay the loan or you should start saving in order to reduce the short fall at retirement.
The tax implications of the implementation of the clean break principle are as follows:
- If an amount becomes payable by a retirement fund on or after 1 March 2012 to a non-member ex-spouse, that person (and not the member ex-spouse) will need to pay tax on that amount.
- No tax will be payable on any amount that becomes payable on or after 1 March 2012 in terms of a divorce order that was issued before 13 September 2007.
- When you transfer to a preservation fund the rules of the GEPF will still apply. This means that should you need to access your capital you will only be allowed to withdraw 1/3 and the remainder will remain invested until retirement age. There will be tax applicable depending on your divorce date as mentioned above.
- Should you have pre-1998 service the tax free portion will also be considerd and calculated on retirement.
GEPF is not going to employ a blanket approach when finalising divorce cases. Each and every case will be treated on its own merit and in accordance to the terms of a settlement agreement which formed part of a divorce decree.”
Should you have existing endorsement, make sure that it is valid, divorcesmart can check and confirm this for you. We will administrate this claim on your behalf. Contact info@divorcesmart.co.za
(Courtesy of the GEPF website, www.gepf.gov.za)
Disclaimer: all the information supplied by this website are intended as guidelines only, it is advisable to contact Divorcesmart directly for appropriate advice for your unique circumstances