CURRENT LAW REGARDING PENSION INTEREST

Section 7(7) of the Divorce ActFootnote ⁴ deems members’ retirement benefits that accrue to them because of divorce to be assets in their personal estates.Footnote ⁵ When members are married in community of property, once such assets are regarded as their assets, they would constitute patrimonial assets that should fall into their joint estates. This entails that the amount of money invested by retirement funds on behalf of their divorcing members should be considered when determining the value of the divorcing spouses’ joint estates. When members are married out of community of property with the application of the accrual system and the non-member spouse's estate at the dissolution of the marriage is smaller than that of the member spouse, the pension interest will be considered when the accrual is calculated. Pension interest is a financial asset that forms part of the member spouse's assets whose estate is larger than that of their spouse. Section 3 of the Matrimonial Property ActFootnote ⁶ (hereafter MPA) provides that the spouse with a smaller estate acquires a claim against the spouse with the larger estate or his or her estate “… for an amount equal to half of the difference between the accrual of the respective estates of the spouses”.Footnote ⁷

The law makes provision for spouses to have a clean break when divorcing by making it possible for non-member spouses to be able to immediately claim their portion of their member spouses’ pension interests upon divorce.Footnote ⁸ Thus, divorce is one of the legislatively recognized events that lead to the accrual of members’ retirement benefits for the benefit of non-member spouses if the parties are married in accordance with the marital regime that enables sharing of patrimonial benefits of the marriage. The date of accrual of retirement benefits has led to unnecessary confusion in regard to the way these benefits should be described. In Eskom Pension and Provident Fund v Krugel and Another,Footnote ⁹ Maya JA (as she then was) held that a pension interest:

It is very difficult to understand how a financial award that will be calculated when the parties are divorcing but with reference to the date the “pension benefit accrues” will be converted into a pension benefit. In other words, a pension benefit that has not yet accrued is a pension interest, and after it has accrued it is a pension benefit. With respect, this is not only linguistically incorrect, it is also unnecessarily confusing. One academic has also attempted, albeit unsuccessfully, to rescue Maya JA's confusing distinction of pension benefit from pension interest.Footnote ¹⁰ According to Heaton “[a] pension interest is an interest that has not yet accrued to the member by the time of divorce [and] … [a] pension benefit is a benefit [withdrawal benefit] that has already accrued to the member”.Footnote ¹¹ It is submitted that, given the fact that the law enables a clean break between the parties, this is an artificial distinction that does not have any practical relevance. The amount held by retirement funds amounts to benefits that would be due to members when any of the identified contingent events in the rules occur. The law has established divorce as a contingent event that would enable non-member spouses to be able to claim portions of such benefits immediately after courts have pronounced their divorce. In other words, the benefits held by retirement funds accrue to member spouses immediately when courts dissolve their marriages. It is important to note that the phrase “accrual of pension benefits”, in the context of money invested and saved on behalf of retirement fund members, simply entails money becoming due to member spouses and not necessarily being paid to such members. Thus, when such benefits accrue to members, such members become entitled to claim what is due to them in accordance with the rules of their retirement funds. It has been argued that “[i]n order to avoid any unnecessary confusion of what such money should be termed at what particular time … it should simply be referred to as ‘retirement savings’.”Footnote ¹²

There are several pension law-related statutes that prohibit the deduction of retirement savings subject to statutory allowable deductions.Footnote ¹³ Section 37D(4)(a)(i)(aa) of the Pension Funds Act (PFA) is one of the clear provisions that allow for the court to order the deduction of retirement benefits. It provides that:

It is unfortunate that certain retirement funds have been reading and implementing this provision restrictively, leading to their refusal to pay non-member spouses shares based on what they regard as divorce orders that do not comply with section 7(8) of the Divorce Act.Footnote ¹⁵ In Barnard v Municipal Gratuity Fund, the Pension Funds Adjudicator correctly observed that “… many complaints before this tribunal indicate that pension funds are frequently incorrectly cited, or not mentioned by name at all, even though they can be identified from the context”.Footnote ¹⁶ Most retirement funds appear not to be implementing section 37D(4)(a)(i)(aa) of the PFA properly. They appear to be focusing on the requirement that retirement funds must be named in the divorce decrees. They seem to ignore the requirement that divorce orders must, at the very least, be identifiable. This is one of the legal uncertainties that non-member spouses are confronted with when attempting to access their portions of their member spouses’ pension interests.Footnote ¹⁷

It was correctly determined in Dosson v Cape Municipal Pension Fund that “[t]he ordinary and literal meaning of the word ‘identifiable’ means something that can be proved or is recognisable.”Footnote ¹⁸ It has been argued that the naming of the retirement fund member in the divorce decree can be one of the methods used to identify the retirement fund to which he or she is a member.Footnote ¹⁹ While not necessarily common, it is, nonetheless, possible at the date of divorce for a member spouse to be contributing to more than one retirement fund. In addition to a retirement fund to which their employer is a contributing employer, a member spouse may also be contributing to a non-occupational retirement fund, such as a retirement annuity fund established by a financial institution.Footnote ²⁰ Under these circumstances, the court must be asked to make an order against all the retirement funds to which the member spouse is contributing. Nonetheless, in practice, a non-member spouse can ask for further particulars in order to obtain the correct names of all the retirement funds to which the non-member spouse is contributing,Footnote ²¹ or even bring an interlocutory application to compel the member spouse to provide such information.Footnote ²²

Section 7(8) of the Divorce Act provides courts with discretion when granting divorce decrees to order retirement funds to pay non-member spouses’ parts of retirement savings that accrued to member spouses because of divorce. Initially, there was some confusion regarding the status of the portion of the pension interests that courts can order retirement funds to pay to non-member spouses.Footnote ²³ In 2016, the Supreme Court of Appeal (hereafter “SCA”) in Ndaba v Ndaba clarified the law in this regard, and held that “[t]he language of s7(7)(a) is clear and unequivocal. It vests in the joint estate the pension interest of the member spouse for the purposes of determining the patrimonial benefits, to which the parties are entitled as at the date of their divorce.”Footnote ²⁴ This essentially means that non-member spouses who are married in community of property are entitled to their member spouses’ pension interests upon divorce.Footnote ²⁵ Non-member spouses who are married out of community of property with the application of the accrual system will only be entitled to the portions of their member spouses’ pension interests if they demonstrate that at the time of the divorce the value of their estates is less than that of their member spouses.Footnote ²⁶

When married member spouses’ retirement savings accrue to them before their divorce, there is no legal provision that prevents them from accessing such benefits or even dealing with them as they please. Member spouses can cash in such benefits in accordance with the rules of their funds. By the time the court dissolves their marriage there will be no “pension interests” that could be considered by the court for the benefit of non-member spouses. Once accrued, this benefit constitutes the patrimonial benefit of the marriage, particularly when parties are married in community of property. However, in practice the proceeds of this benefit will be paid into the bank account of the member spouse. The member will determine how it will be used. This benefit is seldom apportioned between the spouses. It is even worse when parties are engaged in divorce proceedings. During this time, the member spouse can “legally” hide, dissipate or waste his or her financial assets, including money received from the retirement fund. There is evidence in South Africa of financially stronger spouses, who are usually men, “wasting or secreting assets with the intention (particular state of mind) of defeating [their financially weaker spouses, usually women's] claim[s] in the divorce proceedings”.Footnote ²⁷

LIVING ANNUITIES

THE IMPORTANT ROLE OF MATRIMONIAL PRINCIPLES

It would be trite to say that marriage in community of property is a default marital regime that can only be avoided when parties conclude an antenuptial contract in order to marry either out of “direct” community of property or community of property with the application of the accrual system.Footnote ⁶⁰ The practical effect of a marriage in community of property is simply that the parties’ assets and liabilities incurred before and during the marriage are together pooled into a joint estate that is held by the parties in co-ownership and equal undivided shares.Footnote ⁶¹ It is generally accepted in South African law, as correctly argued by Hahlo, that “[c]ommunity of property is a universal economic partnership of the spouses. All their assets and liabilities are merged in a joint estate, in which both spouses, irrespective of the value of their financial contributions, hold equal shares”.Footnote ⁶² In terms of section 14 of the MPA:

This provision identifies three important rights in the form of powers that parties to the marriage in community of property have in relation to their joint estate. The parties to the joint estate have the same powers to bind and manage the assets falling within their joint estate. But most importantly, for the purposes of this article, they have the same right to dispose of the assets that constitute their joint estate.Footnote ⁶³ The parties to the joint estate will by operation of law have the same powers over any asset that accrues to their joint estate. This suggests that, once such property has officially fallen within the joint estate, it cannot in law be utilized for the sole benefit of any of the parties to the exclusion of the other. None of the spouses should be denied the right to share benefits that will arise because of the “exploitation” of the assets that accrued to the joint estate, irrespective of who brought it to the joint estate.

It is worth noting that the fact that spouses to the joint estate have the same powers over their joint estate does not mean that they cannot act independently from each other. Section 15(1) of the MPA empowers spouses married in community of property to perform juristic acts that relate to the joint estates without the consent of their other spouses. However, the legislature has identified several legislative acts that spouses who co-own joint estates cannot perform without the written consent of their other spouses. In particular, section 15(2)(c) of the MPA specifically provides that a spouse:

There is little doubt that this provision is far from being clear inasmuch as retirement benefits are concerned. Nonetheless, it is submitted that the phrase “or any investment” includes retirement benefits that are invested in other financial vehicles such as living annuities and retirement annuity funds. Thus, there is also little doubt that, when living annuities are purchased through the monetary proceeds of retirement benefits, they constitute investments that former retirement fund members make to ensure that they do not outlive their retirement savings. South African law does not clearly describe the nature of the accrued retirement benefits that are used to purchase living annuities. Neither the legislature nor the courts has adequately considered whether these benefits, at the time they accrue to retirement fund members, also accrue to the joint estate.

It appears as if, as provided for in M v M and ST v CT, there is an incorrect judicial assumption that retirement funds only accrue to retirement fund members, but do not constitute part of their estates, either for the purposes of accrual if the member is a party to a marriage where the accrual system is applicable, or the joint estate if the member is party to a marriage in community of property.Footnote ⁶⁵ It is submitted that this judicial assumption is not only wrong, but that it also fails to adequately entertain matrimonial principles in general and section 15(2)(c) of the MPA in particular. It cannot be denied that at the time retirement benefits accrue to members, the retirement funds are obliged to calculate what is due to their members in terms of cash. This process clearly demonstrates that retirement benefits are financial assets that cannot be said not to constitute part of retirement fund members’ estates. This is simply because such assets increase the value of retirement fund members’ personal estates. If members are married in community of property, it thus follows that these financial assets not only constitute part of their personal estates, but also form part of their joint estate.

It is submitted that the legal position as provided for in M v M and ST v CT is unsound and cannot be sustained. There is no legal justification for not treating accrued retirement benefits that are used to purchase living annuities as assets that constitute retirement fund members’ estates. Retirement fund benefits are not, and cannot be treated like, life risk-only insurance policies in which payment on such policies occurs only upon the death of the insured persons/annuitants. While living annuities are insurance products, however, unlike ordinary insurance contracts wherein premiums are paid to cover particular risks, with a living annuity a capital amount is paid upfront to an insurance company to invest and provide periodic payments to the insured/annuitant. Thus, from the start, the insurance company receives money from the insured/annuitant, the value of which can be quantified and paid at any time, should the court so order. The mere fact that accrued retirement benefits have been turned into insurance products through living annuities, and which are then used by member spouses as effective and legal vehicles to hide those benefits, should not be justification for non-member spouses’ to be deprived of their share of those benefits. I submit that where member spouses purchased living annuities for the purpose of preventing non-member spouses from sharing thereon, particularly when they were purchased shortly before the parties’ divorce, the capital amount received by the insurance company should be considered as the amount that the non-member spouse ought to benefit from. This amount may be less than the periodic payments already made to the insured/annuitant on the date of divorce, on the assumption that such money was used for the benefit of both parties unless the contrary is proved.

I concede that the South African courts have correctly determined that risk-only insurance policies are not assets in the estates of the policyholders because, unlike retirement benefits, the proceeds of these policies can never be paid to policy holders because they mature only upon their death.Footnote ⁶⁶ In life insurance contracts, policy holders have to pay premiums and do not have corresponding claims for payment from those policies during their lifetime.Footnote ⁶⁷ However, with retirement benefits, members who paid contributions over a period of time are themselves able to receive their retirement benefits when they are dismissed, retrenched, resign or retire during their lifetime. It is thus submitted that, when retirement fund members become entitled to receive retirement benefits at the time when such benefits accrue, such benefits will constitute part of their estate, and if married in community of property, their joint estate. As such, necessary amendments should be made to the pension law legislation to prevent member spouses from hiding these assets in living annuities.

It is further submitted that at the time retirement benefits accrue to the joint estates, they become patrimonial benefits within such joint estates. This automatically provides non-member spouses with equal rights to the accrued retirement benefits in terms of section 14 of the MPA. Once they have acquired the right of ownership over the undivided accrued retirement benefits, they ought to be consulted in terms of section 15(2)(c) of the MPA when a decision to invest such benefits is taken. The SCA, in Naidoo v Discovery Limited and Others, held that “[s]ection 15(2)(c) of the Act creates an exception to the general rule by prohibiting a spouse married in community of property from alienating an asset in the joint estate without the written consent of the other spouse.”Footnote ⁶⁸ This demonstrates that once retirement benefits have accrued to the joint estate, the financial proceeds thereof cannot be utilized to purchase a living annuity without the written consent of the other spouse. Based on this, it is further submitted that the other spouse to the joint estate must be part of the decision to invest the proceeds of the retirement benefits in a living annuity.

As co-owners of the accrued retirement benefits which now form part of the joint estate, non-member spouses have a substantial interest in how such retirement benefits, once received (and now as part of the joint estate), ought to be invested, because any reckless or negligent investment made without their involvement might potentially prejudice their interests in the said benefits. It is reasonable to assume that non-member spouses, particularly those in financially weaker positions, most of whom, in practice, are women, will never agree to an investment that deprives them of their entitlement in a manner in which living annuities do. It appears that the proper engagement with matrimonial principles suggests that, to the extent that such investment is made without the written consent of the other spouse for the sole benefit of the one spouse, that transaction will then be unlawful. As will be shown below, this not only amounts to unlawful deprivation of property but is also potentially unconstitutional.

It is correct, as observed by the SCA in Naidoo v Discovery Limited and Others, that “… whilst the intention of the Legislature was to give both spouses equal right of disposal with regard to the joint estate, that does not indicate a general intention that they should act jointly in all transactions”.Footnote ⁶⁹ However, one should not lose sight of the fact that section 15(2)(c) of the MPA expressly states those transactions that spouses married in community of property cannot perform without the written consent of their other spouses. Spouses are legislatively prohibited from independently making investments through the assets of the joint estate without the written consent of their spouses. It is unfortunate that South African courts, when dealing with disputes regarding living annuities purchased through those retirement benefits that have accrued to their joint estates, do not adequately deal with matrimonial principles, to the detriment of financially weaker spouses.

It is submitted that this enables financially stronger spouses, usually men, to use living annuities as safe legal vehicles by which to deprive financially weaker spouses, usually women, of the financial assets of their marriages to which they are legitimately entitled based on the matrimonial property systems applicable to their marriages. It is recommended that section 15(2)(c) of the MPA must be amended to clarify the law by inserting the phrase “accrued retirement benefits” in that section. This will prevent retirement fund members married in community of property from independently depriving their spouses of accrued retirement benefits through living annuities. The law should further be clarified by defining accrued retirement benefits as retirement savings that constitute part of retirement fund members’ estates. This will enjoin courts to consider accrued retirement benefits when dealing with disputes relating to the calculation of the accrual of the estates of retirement fund members who are married subject to the accrual system.

DEPRIVATION OF PROPERTY

Section 25(1) of the Constitution is generally known as the property clause in South Africa. However, neither the Constitution in general, nor section 25 of the Constitution in particular, defines the word “property”. In this article, it is submitted that accrued retirement benefits of retirement fund members married in community of property constitute assets within their joint estates. Section 1(a) and (b) of the Tax Administration ActFootnote ⁷⁰ defines the word “asset” as including “property of whatever nature, whether movable or immovable, corporeal or incorporeal and a right or interest of whatever nature to or in the property”. This entails that before retirement benefits accrue, retirement members merely have an interest in these benefits and a corresponding right to receive them once they have accrued. Retirement members receive accrued retirement benefits in the form of movable property that has been turned into cash. This money is paid into their bank accounts or invested in line with their instructions and the rules their funds. In terms of section 1 of the Prevention of Organised Crime Act,Footnote ⁷¹ the word “property” “means money or any other movable, immovable, corporeal or incorporeal thing and includes any rights, privileges, claims and securities and any interest therein and all proceeds thereof”.Footnote ⁷² The Pension Funds Adjudicator in Atkinson and Others v Southern Field Staff Defined Contribution Pension Fund determined that “[p]ension benefits as well as additional benefits such as withdrawal benefits under a pension fund are deferred pay and therefore property.”Footnote ⁷³

It is beyond doubt that retirement benefits constitute property and that when members are married in community of property they accrue to the joint estate. It is now important to assess whether retirement funds members’ decision to purchase living annuities using the proceeds of retirement benefits that have accrued to their joint estates amounts to depriving their non-member spouses of their entitled property. If this does amount to deprivation of property, then whether such deprivation is arbitrary will also need to be assessed. Section 25(1) of the Constitution clearly provides that “[n]o one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property”. South African courts and academics have over the years attempted to explain what the word “deprivation” means. According to Marais “[t]he term ‘deprivation’ … forms part of the state's police power to regulate the use, enjoyment and exploitation of property in the public interest … usually without compensation.”Footnote ⁷⁴

A review of the Constitutional Court cases reveals that in some of the cases this court has adopted a narrowFootnote ⁷⁵ explanation of the word “deprivation”, whereas in others it has described it more broadly.Footnote ⁷⁶ Various South African academics have engaged the approaches of different judges of the Constitutional Court regarding the definition of the word “deprivation”, thus, it is unnecessary to deal with this aspect in this article.Footnote ⁷⁷ It suffices to note that the Constitutional Court approach is that deprivation of property will only occur where the interference with property is “substantial”.Footnote ⁷⁸ Regarding non-member spouses, the deprivation will indeed be substantial when living annuities are literally purchased from the assets of the joint estate for the sole benefit of member spouses. These transactions effectively deny non-member spouses the benefit that they derived due to their matrimonial property system to enjoy all the patrimonial benefits of their marriages. They are literally being stripped of their ownership of the assets that constitute part of their joint estate.Footnote ⁷⁹

Section 25(1) of the Constitution clearly stipulates that deprivation of property per se is not unlawful. Deprivation of property will only be unlawful if it is not sanctioned by law of general application. The law of general deprivation requirement dictates that any deprivation of property in the context of section 25 of the Constitution must be authorized through a source of law that is of general application and not designed to specifically target the person or group of persons who are being deprived of their property. This requirement is often considered in terms of section 36(1) of the Constitution, which will generally be used to assess whether or not the intended deprivation of property amounts to unjustifiable limitation of the non-member spouses’ right to property.Footnote ⁸⁰ In Mlungwana and Others v S and Another, the court reminded us that “[t]he limitation of a right in the Bill of Rights needs to be justified under section 36 … [which] requires a weighing-up of the nature and importance of the right(s) that are limited together with the extent of the limitation as against the importance and purpose of the limiting enactment”.Footnote ⁸¹ It would be trite to say that “[t]he rights protected by the Bill of Rights are subject to the limitations referred to in section 36, to the extent that such limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom, taking into account all relevant factors”,Footnote ⁸² and further that there must be a rational connection between the limitation and the object that it seeks to achieve.Footnote ⁸³ It is submitted that, given the fact that the object of purchasing living annuities through accrued retirement benefits before divorce (or at the very least its impact) is to deny non-member spouses the use and enjoyment of accrued retirement benefits, there can never be a rational connection between infringement of the non-member spouses’ right to property and the object of allowing member spouses to purchase living annuities with accrued retirement benefits when they are about to divorce.

There is no law of general application that expressly deprives non-member spouses of their member spouses’ accrued retirement benefits that are used by member spouses to purchase living annuities. Usually, non-member spouses are deprived of these assets by their member spouses’ retirement fund rules that enable member spouses to purchase living annuities while these benefits are still held by these funds. Non-member spouses are further deprived of their entitled property because of the way the law was interpreted in M v M and ST v CT without adequate consideration of matrimonial principles. It is submitted that this amounts to unjustified deprivation of their entitled property and thus cannot be justified under section 36 of the Constitution.

Now that it is clear that the purchase of living annuities through assets that have accrued to the joint estate for the sole benefit of the financially stronger spouse amounts to deprivation, it is necessary to determine whether or not this amounts to arbitrary deprivation. Section 25(1) of the Constitution clearly renders arbitrary deprivation as per se unlawful and unconstitutional. In the FNB case, the Constitutional Court held that “… a deprivation of property is ‘arbitrary’ as meant by section 25 when the ‘law’ referred to in section 25(1) does not provide sufficient reason for the particular deprivation in question or is procedurally unfair”.Footnote ⁸⁴ The court further held that in order to establish whether there was sufficient reason to justify the deprivation of property, among other things the relationship between the deprivation in question and the ends sought to be achieved by such deprivation must be evaluated.Footnote ⁸⁵ There is a need to evaluate the link between the member spouse's decision to use accrued retirement benefits that are part of the joint estate to purchase a living annuity, thereby effectively depriving the non-member spouse of the enjoyment, use and exploitation of such benefits, and the fact that he or she will be the sole beneficiary of such conduct, which is the end that is sought to be achieved. The court further held that there is a need to consider “… the relationship between the purpose for the deprivation and the person whose property is affected”.Footnote ⁸⁶ It is clear that the purpose of purchasing a living annuity when there is a joint estate before the divorce is to protect accrued retirement benefits from being shared in accordance with the matrimonial dictates of the marriage. This is to prevent the non-member spouse from receiving any part of such benefits.

The Constitutional Court further held that the “… relationship between the purpose of the deprivation and the nature of the property as well as the extent of the deprivation in respect of such property”Footnote ⁸⁷ must be considered. The property that the non-member spouse is being deprived of is a patrimonial asset of the marriage which the member spouse has “lawfully” removed from the joint estate in order to become the only spouse who will enjoy, use and exploit it. This effectively prejudices the non-member spouse, particularly when he or she is a financial weaker spouse who directly or indirectly assisted the member spouse to accumulate that financial asset during the course of the marriage. The court also held that “[w]hether there is sufficient reason to warrant the deprivation is a matter to be decided on all the relevant facts of each particular case, always bearing in mind that the enquiry is concerned with ‘arbitrary’ in relation to the deprivation of property under section 25.”Footnote ⁸⁸

The conduct of the member spouse in depriving the non-member spouse of accrued retirement benefits is usually permitted by the rules of the fund, which apply to members of the fund and not to the non-member spouse, as well as the way in which the court has dealt with this issue. In fact, the law (rules established in terms of the empowering Act) that is applied to deprive the non-member spouse of accrued retirement benefits does not even apply to the non-member spouse. This is the law that is designed not only to regulate the member's relationship with his or her fund when his or her monthly contributions are invested by the fund on his behalf, but also to determine the circumstances under which invested money will accrue to him or her as well as how it can be invested further in living annuities.

In the FNB case, the court merely provided guidance on how sufficient reason can be established when determining arbitrariness of the deprivation of property and did not definitively prescribe how it ought to be established. Thus, future courts when dealing with claims relating to deprivation of property “… have the freedom to strike an appropriate balance between the conflicting individual and social rights that are implicated by the laws that are designed to or have the effect of depriving persons of property, without being constrained by an artificial list of pre-determined factors or considerations”.Footnote ⁸⁹ As such, it is submitted that the law as expressed in M v M and ST v CT amounts to arbitrary deprivation of property and thus unconstitutional.

It is recommended that, when any court in future is faced with a claim of deprivation of accrued retirement benefits, it should carefully consider the nuances presented by matrimonial principles. In its analysis, it should strike a proper balance between the law as it is currently applied and the effect of deprivation on the non-member spouse, taking into account his or her entitlement in accordance with the matrimonial property regime applicable to his or her marriage. This analysis will illustrate to the court that the approach followed in M v M and ST v CT leads to effective arbitrary deprivation of property and thus unconstitutional. It has been correctly argued that “… depending on all the factors, it may sometimes be enough to show that there is a rational link between the purpose of the deprivation and the impact thereof”.Footnote ⁹⁰ However, it is submitted that there is no rational link between the law as expressed in M v M and ST v CT and allowing member spouses to use accrued retirement benefits to purchase living annuities without consulting their non-member spouses, as dictated by section 15(2)(c) of the MPA.

Once retirement benefits have accrued, arbitrary deprivation of property will take place immediately when the fund, on behalf of its member, purchases a living annuity for its member without regard to matrimonial principles that bind the member. The fund will be acting in terms of its rules and in accordance with either the direction or agreement of its member without consultation with the non-member spouse to the prejudice of the non-member spouse, particularly when parties are about to divorce.Footnote ⁹¹ It is hoped that judges presiding over future cases that deal with member spouses who have purchased living annuities on the eve of their divorce by using their accrued retirement benefits will protect non-member spouses by adequately taking into account matrimonial principles. The legislature should come to the aid of all non-member spouses, irrespective of whether they are divorcing, by making it clear that accrued retirement benefits form part of retirement fund members’ estates. Further, that if such members are married in community of property, before they can purchase living annuities with such benefits, they should consult their spouses, and failure to do so will amount to arbitrary deprivation of property.

Finally, it is worth noting that the Pension Funds Adjudicator has also determined that “[the] right to a pension benefit, being a right to property, deserves to be protected by the Constitution.”Footnote ⁹² The first Pension Fund Adjudicator, John Murphy (now a high court judge), when analysing the basis of this right in relation to retirement fund members, held that this protection is necessary “[b]ecause that right is intimately related to one's own efforts and achievements, as opposed to being an ex gratia payment from the employer, it is equivalent to a right in property.”Footnote ⁹³ It cannot be doubted that this right also extends to non-member spouses married in community of property. Most importantly, Murphy, in Atkinson and Others v Southern Field Staff Defined Contribution Pension Fund,Footnote ⁹⁴ determined that:

This quote underscores the point that there is no legislation in South Africa that allows for the deprivation of retirement fund members’ benefits. Neither is there a statutory provision that empowers member spouses to deprive their spouses of the accrued retirement benefits. Murphy was simply illustrating that in the context of retirement benefits, the deprivation of property will be occasioned by retirement fund rules. Thus, the courts must be vigilant and guard against retirement fund rules that enable retirement fund boards of management to deprive either their members or their members’ spouses of their entitled and accrued retirement benefits.