For many South African couples, retirement fund savings represent the single largest financial asset in their estate — often exceeding the value of their home. Yet when signing an antenuptial contract, pension and retirement fund benefits are frequently treated as an afterthought. This article explains how retirement fund benefits interact with the accrual system, what options are available when drafting your antenuptial contract, what happens on divorce and death, and the impact of recent legislative and case law developments.
If your antenuptial contract includes the accrual system and you do not specifically exclude retirement fund benefits, pension interest forms part of the accrual calculation on divorce. This is the effect of section 7(7)(a) of the Divorce Act 70 of 1979, read together with the Matrimonial Property Act 88 of 1984. On divorce, each spouse's pension interest is deemed to form part of their assets for the purpose of determining whether an accrual has occurred and, if so, how much is payable. In practical terms, this means that the growth in your retirement fund during the marriage increases the size of your estate at dissolution. If your estate's accrual (including pension interest) is larger than your spouse's, you may owe your spouse half the difference.
The term "pension interest" has a specific legal definition in the Divorce Act. It does not mean the same thing as your total retirement fund balance. For pension funds, provident funds, and preservation funds, pension interest is the benefit the member would have been entitled to if they had resigned from the fund on the date of divorce. This is typically the withdrawal benefit — not the full retirement benefit. For retirement annuity funds, pension interest is calculated as the total contributions made to the fund up to the date of divorce, plus accumulated simple interest at the prescribed rate. This figure is often significantly lower than the actual fund value, because it does not include investment returns beyond the prescribed interest rate. Understanding this distinction is important because the pension interest figure used in the accrual calculation may not reflect the true market value of the retirement savings.
The introduction of the two-pot retirement system has changed how retirement fund savings are structured. Contributions from 1 September 2024 are split into a savings component and a retirement component, with pre-existing benefits preserved in a vested component. On divorce, the pension interest allocated to the non-member spouse is now taken proportionately from all three components. While this does not change the fundamental principles, it adds complexity to the calculation and implementation of divorce orders.
If you do nothing — that is, your antenuptial contract does not specifically address retirement fund benefits — pension interest is automatically included in the accrual calculation.
When this makes sense:
The risk: If one spouse has a substantially larger retirement fund (for example, because they have been contributing for longer or earn significantly more), the growth of that fund during the marriage could result in a large accrual claim by the other spouse upon divorce.
Section 4 of the Matrimonial Property Act allows parties to exclude specific assets from the accrual calculation by express provision in the antenuptial contract. This includes retirement fund benefits.If you include an exclusion clause, each spouse's pension interest is disregarded when calculating the accrual on divorce. Each spouse keeps their own retirement savings regardless of how much they grew during the marriage.
When this makes sense:
The risk: If one spouse stops working to raise children or care for the family, they may accumulate little or no retirement savings during the marriage. An exclusion clause means they have no claim against the other spouse's pension growth — even if their career sacrifice enabled that growth. This is the most commonly cited criticism of pension exclusion clauses.
Drafting note: The exclusion must be express and unambiguous. A general reference to "excluding certain assets" is not sufficient. The clause should specifically refer to pension interest as defined in the Divorce Act, and should cover pension funds, provident funds, preservation funds, and retirement annuity funds.
This is where retirement fund benefits diverge sharply from other assets.
Section 37C of the Pension Funds Act provides that death benefits payable by a retirement fund do not form part of the deceased member's estate. Instead, the fund's trustees must distribute the death benefit to the member's dependents in a manner they consider fair and equitable. This provision overrides everything — the antenuptial contract, the deceased's will, and any other agreement between the parties. The surviving spouse will ordinarily qualify as a dependant, but the ANC cannot direct the trustees to pay the death benefit into the joint estate or to the surviving spouse specifically. The practical implications are significant:
If certainty of provision on death is important to you, the correct approach is to:
On divorce, the Divorce Act provides for a "clean break" — the pension interest can be paid out to the non-member spouse at the time of the divorce, either as a lump sum or by transfer to their own retirement fund. This avoids the need for ongoing claims against a former spouse's retirement savings. For the fund to give effect to this, the divorce order must comply with specific requirements set out in section 7(8) of the Divorce Act and section 37D of the Pension Funds Act:
An order that simply directs one spouse to pay the other will not be binding on the fund. Precise wording is essential.
When pension interest is paid to a non-member spouse on divorce, the amount is taxed as a withdrawal benefit in the hands of the member spouse — not the non-member spouse. The non-member spouse receives the amount tax-free. This has practical implications for settlement negotiations. The member spouse bears the tax cost of the pension interest payment, which can be significant depending on the amount involved and the applicable tax brackets. The tax treatment does not affect the drafting of the antenuptial contract itself, but it is an important factor to understand when the accrual is eventually calculated and settled.
The Constitutional Court's October 2023 judgment in EB (born S) v ER (born B) and Others [2023] ZACC 32 declared section 7(3) of the Divorce Act unconstitutional to the extent that it excluded spouses married after 1 November 1984 from seeking a redistribution order. The practical effect is that even where an ANC excludes the accrual system entirely (a "cold exclusion"), a court may now order a redistribution of assets if it considers such an order just and equitable.
A key unresolved question is whether pension interest can form part of the assets subject to redistribution under section 7(3). Section 7(7)(c) of the Divorce Act previously excluded pension interest from the deemed-asset provision for marriages concluded with an ANC after 1 November 1984. But commentators have noted that following EB v ER, if the redistribution remedy now applies to these marriages, pension interest may arguably fall within the scope of assets available for redistribution.
This issue has not yet been definitively decided by the courts and is likely to be the subject of future litigation. The General Laws (Family Matters) Amendment Bill, which is expected to give legislative effect to the EB v ER judgment, may provide further clarity.
The bottom line for couples drafting antenuptial contracts today: no exclusion clause — whether for pension or any other asset — can be regarded as absolute. The courts now have broader powers to intervene in the public interest.
For most couples with broadly comparable employment prospects and retirement fund positions, we recommend leaving pension interest in the accrual (the default). It is the simplest approach, requires no special drafting, and produces the fairest outcome in most scenarios.
Where there is a significant disparity in fund values, or where one spouse has a large pre-existing retirement fund, we discuss the exclusion option carefully with both parties and ensure they understand the implications — particularly for a spouse who may later pause their career for family reasons.
In all cases, we advise clients to:
At Louwrens Koen Attorneys, we draft antenuptial contracts that address retirement fund benefits clearly and in accordance with current legislation. We ensure you understand how your retirement savings will be treated on divorce and death, and we tailor the contract to your specific circumstances.If you need advice on pension interest in the accrual system, or if you are going through a divorce and need assistance with the accrual calculation, contact our office.
Louwrens Koen Attorneys
Disclaimer: This article is intended for general information purposes and does not constitute legal or financial advice. Tax implications depend on individual circumstances and should be discussed with a qualified tax practitioner. Consult an attorney before entering into an antenuptial contract.
