The University of the Witwatersrand hosted an inaugural lecture for one of their newest lecturers, Professor Clement Marumoagae on 17 September 2024. The lecture was attended by students, academia, legal practitioners, as well as the Deputy Judge President of the Gauteng Division of the High Court, Aubrey Ledwaba. Prof Marumoagae’s lecture was titled ‘Should non-member spouses receive their member spouses’ accrued retirement benefits held by retirement funds upon divorce? A call for law reform.’ He said his paper discussed the sharing of retirement benefits between divorcing spouses in South Africa (SA) and focused on the legal framework that regulates retirement benefits that accrued to retirement funds members before a divorce is granted.
Prof Marumoagae said that the purpose of the paper was to highlight that currently the law permits retirement fund members to exit retirement funds while divorce proceedings have been instituted in order to hide assets, to make sure that non-member spouses cannot lay claim to the retirement fund. ‘In this paper I argue that the legal situation is unsound and there is an urgent need for law reform.’ Prof Marumoagae added that there is fragmental regulation of the retirement industry in SA, with several pieces of regulations regulating different aspect of the retirement industry.
Prof Marumoagae noted that some of the statutes that are part of the retirement regulatory framework in SA includes the –
Prof Marumoagae pointed out that only one of the regulatory frameworks refers to what SA currently refers to as assets that belong to the fund. He added that s 5(1)(b) of the Pension Fund Act basically says that when retirement funds are going about their business, when they receive contribution from members those contributions will become the assets of the fund. ‘This effectively means that we cannot say that members who are contributing to the retirement fund owned those assets,’ Prof Marumoagae said.
Prof Marumoagae added that this is a way for members of the retirement fund to hide assets from non-member spouses. He said that once the benefit has been declared to be the benefit of the fund, it means that a member has a right to claim a benefit only upon exiting the fund, as stated by the rule of the fund. He pointed out that this is where the problem occurs. Because members, can only exit the fund upon dismissal, resignation, retirement and retrenchment, death, as well as divorce.
Prof Marumoagae said that all the other exit events from the fund allow the member or the member’s beneficiaries to be able to claim from the fund. He added that divorce allows non-member spouses to claim from the fund. He said if a member claims from any other exit event from the fund, they will be claiming for their own benefit, and this will not be of benefit to the non-member spouse.
Prof Marumoagae said that the South African Law Reform Commission (SALRC) in issue paper 41 Project 100E titled ‘Review of Aspects of Matrimonial Property Law,’ noted that member spouses in the fund are able to use vehicles such as living annuity to redirect assets of the fund away from the fund and away from their spouses, by making sure spouses cannot claim any portion. Prof Marumoagae pointed out that the current status of some of the benefits accrued to members, where the marriage allows sharing of assets, has not been adequately researched in SA. ‘The [scenario] basically is that you have two [individuals] married to each other, one is the member of the pension fund engaged in the process of divorce. They can exit the fund and redirect their benefits. Notwithstanding the fact that they are married in terms of a married system that allows for sharing of benefits.’
Prof Marumoagae added that this kind of situation has not been investigated in SA. He said that there is a general assumption that benefits that are held by retirement funds, when they accrued to members they form part of the joint estate. ‘As such if a member is married in community of property or out of community of property with the accrual system, they will be able to claim as part of the co-owners of the joint estate,’ Prof Marumoagae added. He said that in reality it does not work like that. He said that there must be something done while the members are still part of the retirement fund to allow non-member spouses to be able to claim from the funds.
Prof Marumoagae said there should be an investigation into whether non-members can claim benefits while they are still held by the fund. He pointed out that this raises a fundamental question of the actual relationship between the pension law rules and the matrimonial principle of the accrual retirement benefit during the marriage. ‘In short what actual right if any the non-members spouse has to the accrued benefits of the member of the fund,’ Prof Marumoagae said. He added that it is important to understand the matrimonial principles and where the background resides.
Prof Marumoagae looked at a few cases that dealt with retirement funding. One of the cases he cited was Ndaba v Ndaba [2017] 1 All SA 33 (SCA); 2017 (1) SA 342 (SCA). He went on to suggest what the SALRC should do with regards to addressing this issue. He said that the first challenge with the entire scheme is that there are a lot of phrases, and the phrases are defined differently. He pointed out that when one looks at them, they more or less speak about the same thing to a lesser or greater degree. ‘You have a pension interest, member’s interest, retirement interest, accrual benefit, retirement benefit, retirement savings, member’s account and so forth, which are defined differently in the pension regulated legislation. However, they all refer to the benefit that the member accumulates all the time.’
Prof Marumoagae said what now becomes a problem is what should be calculated at the time of divorce and what should be paid to the non-member spouse. The first proposal that Prof Marumoagae made is that there is a need to repeal or remove all these phrases from all the legislation that deal with retirement benefits. He pointed out that they should be replaced with the phrase ‘retirement savings.’ ‘I propose that it should be defined as follows: The total value of the accumulated benefits in the vested, savings and retirement components that the member will be entitled to receive when he or she exits the fund.’
Prof Marumoagae said the words ‘savings and retirement’ come from the buzzword ‘two-pot system.’ He added that currently member’s benefits are now divided into three pots, namely:
Prof Marumoagae said that his suggestion will make it easy for the fund to know what should be calculated. He added that it is also a method of calculating what should be paid to the non-members spouse should the members exit the fund before the date of the divorce. ‘If the court has ordered whatever percentage should be paid to the non-members spouse, that percentage should be paid to the non-members spouse.’
Prof Marumoagae’s second proposal is that there is a need to amend all pension regulation by inserting a specific provision into pension-related statutes. ‘Where the retirement savings accrue to a member who is married in terms of the matrimonial property system other than out of community of property without the accrual, the fund may not, without the consent of the spouse of the member implement the member’s instruction relating to the benefit without the written consent of the spouse of the member.’
The third proposal Prof Marumoagae made is that s 7(7)(a) of the Divorce Act 70 of 1979 should be amended as follows:
‘In the determination of the matrimonial benefits to which the parties to any divorce action may be entitled, the retirement savings of any party shall, subject to paras (b) and (c), be included’.
At the end of Prof Marumoagae’s lecture, legal practitioner Nompumelelo Seme, gave a vote of thanks and also paid tribute to Prof Marumoagae. She said that Prof Marumoagae is the first product of Wits to have grown academically at Wits and later becoming a professor at Wits. She added that this is a huge achievement because as much as it took a village, Prof Marumoagae is a deliberate person. A focused person who seizes opportunities and makes the most of them. ‘There is a lot that we can learn as academics at a place like Wits from Professor Marumoagae’s habits,’ Ms Seme said. She described him as a dedicated person and hard-working individual.
Ms Seme further spoke about how Prof Marumoagae likes developing other people. She gave an example about an article Mr Marumoagae wrote together with Palesa Lebitse in De Rebus (see Clement Marumoagae and Palesa Lebitse ‘Security for costs when leave to appeal is granted by the SCA to the Full Court‘ (2024 (Aug) DR 34)). She also described Prof Marumoagae as a true feminist and also a person who takes steps in things that he believes should happen. Ms Seme pointed out that Prof Marumoagae hates injustice. She spoke about how he spearheaded the attempt to do away with the requirement for driving licenses for candidate legal practitioners. ‘Clement wrote a paper and within the LPC fought to do away with that requirement,’ Ms Seme added.
Ms Seme concluded by speaking about the work that Prof Marumoagae does in family law, pension law, and insolvency law. She pointed out that it is quite clear that Prof Marumoagae is interested in what really matters. She said that family is the beginning. She added that even though people perceive family law as being on the periphery of law, in fact, family law is the foundation of society. And his interest in his subject stems from the fact that we all come from families, either married, divorced, aspiring to get or wanting money from our spouses one way or the other. ‘Clement is the solution,’ she said. Looking at the relevance of Prof Marumoagae’s research has led to him being quoted in many judgments.
Ms Seme said that she has seen the accessibility of Prof Marumoagae’s judgments for other judges who are faced with real problems. ‘I now see merit that there is a space and there is a need for academics to write an accessible way and to solve and resolve ordinary problems, more so than writing in a way I thought would make me fancier,’ Ms Seme added.
Kgomotso Ramotsho Cert Journ (Boston) Cert Photography (Vega) is the news reporter at De Rebus.