Clean break at divorce rule

Clean break at divorce rule

Until now, at divorce the parties could at their divorce settlement agree to divide the pension interest, but the non–member spouse received benefits only when the member spouse exited the Fund. The non-member did not receive any investment growth on his or her share of the benefits. However the member spouse is responsible for all income tax payments.

With effect from the 13 September 2007, the Pension Funds Amendment Act 11 of 2007 introduced what is known as the clean-break principle, where a non-member spouse now has immediate access to the pension interest benefit awarded to her or him in terms of the divorce order.

Advantage to a non-member spouse is that they can now earn a return on investment, if they invest their portion. It should however be noted that with divorces after 1st March 2009, the non-member spouse carries the tax liability (at the new tax rate applicable on withdrawal).

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