Divorce is a challenging and emotionally charged process, made even more complex when retirement assets are involved. As one of life’s significant financial decisions, the division of retirement assets during a divorce can have a profound impact on both parties’ future lives. In South Africa, understanding the laws, regulations, and options surrounding retirement assets and divorce is crucial. In this post, we provide a comprehensive guide to help individuals navigate this intricate topic and make informed decisions.

Understanding Retirement Assets

Retirement assets encompass various investments and savings that individuals accumulate during their working lives to support their retirement. These can include pension funds, retirement annuities, preservation funds, provident funds, and life insurance policies with a retirement element.

Types of Retirement Assets

Pension Funds

Pension funds are established by employers and contribute towards an employee’s retirement savings. They are governed by the Pension Funds Act and typically require contributions from both the employer and the employee.

Retirement Annuities

Retirement annuities are individual savings plans that individuals can voluntarily contribute to. These contributions enjoy tax benefits and can be used to supplement other retirement savings.

Preservation Funds

 Preservation funds are designed to preserve retirement savings when a person changes jobs. They allow individuals to maintain the tax benefits attached to the accumulated retirement savings without cashing out.

Provident Funds

Provident funds are similar to pension funds but differ in that the entire accumulated amount is available as a lump sum payment upon retirement. They are governed by the Income Tax Act.

Life Insurance Policies 

These policies combine life insurance coverage with an investment component that builds up cash value over time. Upon retiring, the accumulated cash value can be accessed.

The Foundation

Understanding the basics is essential. Most marriages in South Africa operate under the marriage in community of property regime. This means that from the beginning of the marriage, all assets and liabilities, including retirement assets, form part of a joint estate. The intention behind this arrangement is to foster financial unity, ensuring that both spouses share equally in the accumulated wealth during the marriage.

The Legal Framework

The Divorce Act is the guiding document for divorce proceedings in South Africa. Section 7(1) grants the court the power to make orders in accordance with a written agreement between spouses or, in the absence of an agreement, to order an equal division of the joint estate. This includes retirement assets. However, the specific treatment of retirement assets became more defined with the introduction of Section 7(7) and Section 7(8) through the Divorce Amendment Act 7 of 1989.

Evolution of Pension Interest

Before the amendment, the common law position was that the member spouse’s pension interest did not form part of the joint estate. This meant that, without a specific court order, the non-member spouse had no recognised interest in the pension of the member spouse, especially if the benefits had not yet accrued. The turning point came with the introduction of Section 7(7) and 7(8) of the Divorce Act, notably highlighted in the Ndaba v Ndaba case.

The Turning Point

In the Ndaba case, the parties were married in community of property, and the divorce order incorporated a provision that the joint estate be divided equally. The primary issue was whether the non-member spouse was entitled to the pension interest of the member spouse without a specific court order. The Supreme Court of Appeal (SCA) held that the intention of the legislature in introducing Section 7(7)(a) was to enhance the patrimonial benefits of the non-member spouse. The SCA clarified that for marriages in community of property, the pension interest of each party is automatically included in the deed of settlement that becomes an order of the court.

Enforceability and Protection of Retirement Assets

Understanding the enforceability of retirement assets post-divorce is crucial. Section 37A of the Pension Funds Act protects a member’s benefit, allowing a retirement fund to make a deduction only if permitted by the relevant laws. Section 37D(1)(d)(i) of the Pension Funds Act, however, makes an exception for divorce, stating that a registered fund may deduct any amount assigned to a non-member spouse in terms of a court order under Section 7(8)(a) of the Divorce Act.

Keys to Successful Division

To ensure compliance and enforceability, a divorce order must meet specific conditions outlined in Section 7(8) of the Divorce Act and Section 37D(4)(a) of the Pension Funds Act:

Discovery Process

Both spouses provide a full disclosure of their financial positions, including details of all retirement assets. This helps determine the value of the assets to be divided.


Retirement assets must be valued accurately, accounting for tax implications and growth potential. Professional financial advice is crucial to ensure fair valuation.

Negotiation or Court Proceedings

Spouses can negotiate the division of retirement assets themselves or seek assistance from mediators. If no agreement can be reached, the court may determine the division based on relevant legislation.

Qualified Domestic Relations Order

To allocate retirement assets, a Qualified Domestic Relations Order is necessary. This document instructs the relevant retirement fund trustees on how to distribute the assets between the parties.

Tax Implications and Considerations

Dividing retirement assets during a divorce can have tax implications for both parties involved. It is essential to consider the following:

  • Early withdrawal penalties may apply if retirement assets are cashed out before the agreed-upon age.
  • Tax liabilities may arise if retirement assets are transferred or sold.
  • Receiving retirement assets in a divorce settlement may result in tax-free growth if they are reinvested in another retirement vehicle.
  • Consulting a professional tax advisor is advisable to navigate these complexities and optimize tax planning.

Seeking Legal and Financial Advice

Divorce is a legal and financial process that requires expert guidance. Consulting professionals in both fields can help individuals protect their rights and make well-informed decisions. Engaging a divorce attorney and a financial advisor with experience in divorce matters is highly recommended. We recommend consulting with professionals at Crest Trust about divorce and retirement assets.


Divorce can be a challenging chapter in one’s life, but it is not the end of the world. It is the end of a bad journey and the beginning of a brand-new life. So understanding how retirement assets are divided in South Africa is crucial for ensuring a fair and secure future. Seeking assistance from Crest Trust can provide valuable support during this emotionally taxing period. They will help you to navigate the complexities of divorce and retirement assets with confidence.