The danger that Government Employee Pension Fund (GEPF) members may lose their pension money after a divorce due to the ‘clean-break principle’ is a thing of the past and has been replaced by a new principle whereby years of service are reduced in proportion to the amount that is paid out with the divorce.
This can be gleaned from the answers to written questions that adv Anton Alberts, chairperson of the FF Plus, posed to the Minister of Finance on the matter. (Please see the questions and answers below).
According to adv Alberts, in the case of divorce the clean-break principle automatically created debt, which the GEPF member had to pay off. If the member was unable to pay off the debt, his/her pension money was used to settle the outstanding amount and that meant that civil servants could possibly be left without pension money.
He says that since years of service will now be reduced in proportion to the amount of money that is paid out with the divorce, the remainder of the members’ fund can keep growing by means of monthly contributions and investment performance.
“Over the years, numerous government employees have lodged complaints regarding the situation with the FF Plus and some continually sent queries to the Public Investment Corporation (PIC), the Fund as well as the Minister of Finance and voiced their opinion that the principle was unfair.
“It seems as if the continued pressure from the FF Plus did bring about results as die old dispensation was done away with.
“It is also important to take note of the fact that people who have already been affected by the clean-break principle in the past, can now switch over to the new dispensation so that they will no longer have that debt.
“The new dispensation will be implemented by means of a legislative amendment. The FF Plus will keep a close eye on the amendment bill to ensure that it is fair,” says adv Alberts.
Questions and answers:
NATIONAL ASSEMBLY
QUESTION FOR WRITTEN REPLY
QUESTION NUMBER: 2470 [NW2727E]
DATE OF PUBLICATION: 25 August 2017
2470. Adv A de W Alberts (FF Plus) to ask the Minister of Finance:†
(1) With reference to the clean break principle when a member of the Government Employees Pension Fund (GEPF) gets divorced, (a) how many members of the fund have been affected by this since the rule was instituted, (b)(i) what is the cumulative debt of all the members to the fund and (ii) what is the interest rate at which the debt is levied and (c) how many members have already expressed objections to the principle;
(2) whether the principle will be retained and whether plans exist to abolish it; if not, (a) why not and (b) what are the full reasons and particulars in this regard; if so, (i) what are the concomitant particulars and time lines, (ii) with what will the principle be replaced and (iii) what happens to the members who have already incurred debt in terms of the clean break principle? NW2727E
REPLY:
(a) It is important to understand that there is no debt in the conventional sense of the word. The GEPF provides affected divorced members with a funding mechanism to replenish their benefit after paying out the non-member spouse without adversely affecting other members of the Fund.
(b) (i) as explained in (a) above, it is not correct to consider the so-called divorce debt in the GEPF context as conventional debt that accumulates. Divorced members choose to replenish their benefits or not.
(ii) The GEPF does not keep statistics of members who object as the use of this mechanism to replenish their benefit is a member’s choice. However, the GEPF is a respondent in a court application by a member on the application of the “clean break principle.”
2 Although there are no obvious negative effects of the current application of the clean break principle, it confuses members, and the Board has already decided to discard the current application of the clean break principle in its current form. After the GEPF consulted the employer and employee representative through the Public Service Coordinating Bargaining Council (PSCBC), the PSCBC has taken a resolution, Resolution 1 of 2017, to make the necessary changes to the GEP Law and rules. This is subject to the normal process of changing laws in the country
(i) The current mechanism for implementing the clean break principle will be replaced with a reduction of the member’s years of service commensurate with the amount paid to the non-member spouse in terms of the divorce decree.
(iii) Members who have already used the current the clean break principle mechanism to replenish their benefit will be given the option to have their years of service reduced commensurate with the amount paid to the non-member spouse in terms of the divorce decree.
Although there are no obvious negative effects of the current application of the clean break principle, it confuses members, and the Board has already decided to discard the current application of the clean break principle in its current form. After the GEPF consulted the employer and employee representative through the Public Service Coordinating Bargaining Council (PSCBC), the PSCBC has taken a resolution, Resolution 1 of 2017, to make the necessary changes to the GEP Law and rules. This is subject to the normal process of changing laws in the country.
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