Financial Lessons to Learn from Ultra Trail Running

Most divorcing couples fight over the house, the cars, or who gets the dog. Retirement savings barely get a mention until months later, when someone asks their adviser what actually happens to their pension fund now that they're divorced. By then, the assumptions they were working from are usually wrong. What happens to your retirement investments in a divorce comes down to two things: how you're married, and what stage your investment is in. Start with the marriage. If you're married in community of property, everything you and your spouse own falls into one joint estate, including retirement savings built up during the marriage. That estate gets divided when the marriage ends, and your spouse has a claim on your pension interest. If you're married out of community of property with accrual, your estates stay separate, but the spouse whose estate grew the most during the marriage owes the other spouse a claim equal to half the difference, and retirement fund growth counts towards that number. If you're married out of community of property without accrual, your estates stay entirely separate, and so does your pension. Your spouse has no automatic claim on it at all. So the contract you signed years ago quietly decides how your retirement savings get treated on the way out. Now the second question: is your investment still growing, or already paying you an income? Pension funds, provident funds, preservation funds, and retirement annuities that are still accumulating are all treated the same way under the law. Section 37D of the Pension Funds Act allows a portion of that fund, the pension interest, to be paid out to the non-member spouse immediately on divorce, without waiting for the member to retire or resign. That's the clean-break principle, and it's been law since 2007. The non-member spouse can take their share in cash, which is taxed in their hands, or transfer it into their own retirement fund and keep the tax benefit intact. If you belong to the Government Employees Pension Fund, the same clean-break idea applies, but the mechanics differ because the GEPF isn't regulated by the Pension Funds Act; it runs under its own legislation. Since 2011, the GEPF has paid a portion to the non-member spouse in much the same way private funds do. Where it differs is how the fund recovers that amount from you afterwards. Instead of creating a debt that you had to repay with interest, as it once did, the GEPF now reduces your years of pensionable service to reflect what was already paid out. That quietly lowers your eventual benefit, so it's worth building into your retirement planning rather than discovering it later. Living annuities work differently again. By the time you're in one, you've already retired, and the capital technically belongs to the insurer, not you. What you hold is a contractual right to draw an income from it for the rest of your life. That means a living annuity doesn't count as pension interest, and an ex-spouse can't simply claim a slice of it the way they could with a pension fund. But the right to keep receiving that income is still worth something, and the courts have found ways to bring that value into account. Read our previous article on this here: https://www.bovest.co.za/living-annuities-and-divorce Here's a case worth knowing about, because it shows how a badly worded divorce order can leave someone chasing their ex-spouse personally for money that should have come straight from the fund. Mrs Swemmer's divorce order stated that she was entitled to the “full proceeds” of her husband's retirement annuities, held with Old Mutual and Sanlam. When she tried to claim, both insurers refused to pay out the full amount. She took them to court, and in 2004 the Supreme Court of Appeal sided with the insurers. The Divorce Act, the court explained, only deems a specific, narrowly defined slice of a retirement fund — the “pension interest”, roughly what the member would have received had they resigned on the date of divorce — to be an asset that can be assigned to a non-member spouse. Anything beyond that isn't binding on the fund, no matter what the divorce order says, because the Pension Funds Act specifically prevents a member's benefit from being ceded or transferred outside that narrow exception. The lesson: a divorce settlement is only as good as the wording used in it. If the order doesn't track the statutory definition precisely, the fund is entitled to refuse payment, and you're left pursuing your ex-spouse personally for a shortfall that should never have existed. A few things worth doing if this applies to you: Get retirement fund statements and living annuity valuations to your adviser and attorney early, not once the settlement is already being drafted. Make sure the divorce order's wording tracks the statutory definition of pension interest exactly. Funds won't act on anything less precise. Update your beneficiary nominations the moment the decree is final. Divorce doesn't automatically remove an ex-spouse from a nomination form. This is general information, not advice tailored to your specific situation.  Ruvan J Grobler FSA® (PGDip Financial Planning)