New legislation in the pipeline will give you a fairer share of your husband or wife's retirement benefits if you get divorced.
Statistics show that two out of three marriages in South Africa end in divorce.
At the moment, the benefits that you are entitled to on divorce depend on how you were married: in community of property or out of community of property (by ante-nuptial contract) or under the accrual system.
The law says if you were married in community of property your spouse's retirement benefits are lumped together with the other assets of the marriage and the total is shared when you divorce.
If you were married out of community of property, you have no right to any part of your husband's or wife's assets, including retirement benefits. Under the accrual system, any assets acquired during the marriage including retirement benefits must be split on divorce.
One problem is that you must wait to get your share until your former spouse resigns, retires or dies. Another problem is that the employer's contributions are often excluded from the calculation of the retirement benefits you can claim.
Also, if you get divorced after your husband or wife retires, you have no claim on his or her retirement benefits.
The draft legislation says you should be allowed half the joint retirement benefits when you get divorced, irrespective of how you were married, unless you specifically state otherwise in your pre-nuptial contract.
If the law is passed, you will be able to waive your right to share in the retirement benefits or to accept other assets instead.
Retirement benefits will no longer be considered part of the couple's asset pool, but will be treated separately.
This means that even if the rest of the assets are wiped out by debt, you can be sure of getting a share of the retirement benefits.
Furthermore, if the proposals are accepted, you will be able to transfer this share into your own name as soon as you get divorced, rather than waiting until your husband or wife resigns or retires.
Gideon Smith, who was responsible for drafting the legislation for the Law Commission, says the aim of the proposals is to give you and your former spouse an equal chance of financial independence in your old age.
The value of the retirement benefits will be calculated as follows:
* Defined contribution schemes
If you get divorced before your spouse resigns, retires or dies, you will be entitled to half of all employer and employee contributions from the date of your marriage to the date of the divorce, plus investment returns on this money. You can choose to transfer this money to a fund of your choice or leave this money in the retirement fund.
If you get divorced after your spouse has retired, you will be entitled to half of the monthly annuity that is paid to him or her.
The lump sum which a fund member has the option of taking on retirement would already have been paid out. Whether you get a portion of this money or not depends on whether it has been spent. Any unspent portion will be included under the general assets of the couple, of which you may get a share.
* Defined benefit schemes
You will be entitled to 50 percent of the benefit proportional to the term of the marriage and the term of the membership of the fund when it becomes payable, whether on your spouse's withdrawal from the fund, or on his or her death or retirement.
A second draft of these proposals, to be know as the Division of Retirement Fund Benefits on Divorce Act, is due to be released soon and will be open for comment until the middle of February.
If the legislation is passed, there will be tax implications just as there are now on any withdrawal from a retirement fund. At the moment, your spouse pays tax on his or her pension fund benefits on retirement or resignation and if you get a share, it is from this after-tax portion.
The new legislation will allow you to transfer your share from the fund before the retirement or resignation of your former spouse. The tax to be collected will be calculated on your spouse's income and situation. But it will be deducted from your share, says Vlok Symington, deputy director policy and law application at the South African Revenue Service (SARS).
If you choose to leave your share in the fund until your former spouse takes his or her share, you will probably only pay tax when the money is paid out to you, not when you are divorced.
The taxman is considering the possibility of taxing your and your spouse separately should you get divorced after he or she retires, rather than taxing your spouse in the normal manner upon retirement.
Vlok says that SARS is looking at the possible tax implications of the proposed legislation and no decisions have yet been made.