GEPF sets record straight on implications of divorce and early withdrawal
- Published on 30 Oct 2015
- HR Pulse News Desk
Moneyweb reports that the Government Employees Pension Fund (GEPF) held a media roundtable on Thursday to clear up confusion that has arisen around the ‘clean-break’ principle and members’ actuarial interest (AI).
These, respectively, refer to cases of divorce where a spouse is entitled to a share of a member’s pension, and where a member retires with less than ten years of service or withdraws from the fund prior to retirement. The ‘clean-break’ principle refers to the practice of making the portion of a pension benefit attributable to a non-member spouse, as per the terms of divorce, payable on the date the divorce is granted.
The principle was introduced in law in 2007 and all private funds adhered to it, but the GEPF only introduced it in 2012 after it was ordered to do so by the Cape High Court. The recent confusion has resulted because of something called ‘notional debt’, which some people understood as an amount that would be treated as debt to cover the payment made to the non-member spouse. And when the spouse is paid, the member’s benefit would then be reduced. But, the GEPF’s principal executive officer, Abel Sithole said: “We give members the option to replenish the amount that has come out, and it becomes a notional debt. The member also has an option to pay back an installment that they can afford in order to get back to their full benefit, even if it’s 80%. They can also pay the amount as a lump sum.”
On early retirement or withdrawal, Sithole explained that the amount members would get on any given day is their AI in the fund, which is an estimated value of the benefit that the member has built up to a point in time. In March this year, the AIs of members were revised downwards for the first time. But, Sithole indicated that this does not “in any way impact what your pension will be upon retirement.”
Source: SA Labour News
