Controversial “clean break principle” for public servants to change

The controversial and damaging ‘clean break principle’ which is applicable to pension funds of government employees in cases of divorce, is going to be re-considered, Adv. Anton Alberts, the FF Plus’ parliamentary spokesperson on Finance says.

This appears from a reply of the minister of Finance, Nhlanhla Nene, to a question pertaining to this issue of Adv. Alberts. Adv. Alberts says this principle comes down to a portion of pension benefits due to a divorced spouse having to be paid within a short period of time following the divorce and not when the person who is the member of the pension fund terminates his membership when he exits the pension fund. The member of the fund then has to start repaying this amount to the fund, similar to the repayment of a loan and this could have a very big adverse impact on the growth and capital amount of the fund, especially with early retirement.

“The minister acknowledges that the principle has negative effects and that is why it is going to be changed, but still avoids straight answers about the impact thereof on the person on whom a loan is unilaterally forced. They are clearly scared of legal action in this regard. “There is no legal principle to force a loan onto the remaining member of the fund. This is nothing other than a loan as interest is even charged on the amount which has to be repaid.

“The minister also mentions that it actually a court which could enforce such a principle and is therefore responsible for the harmful effect, but this is not true as the rule had been created by the GEPF in cooperation with the minister by way of legislation and new fund rules. The court merely makes it an order. “They also avoid the question as to whether they would retroactively compensate individuals for losses suffered due to the loans. The FF Plus will continuously monitor the process and will ask further questions to ensure justice for the disadvantaged individuals. “Persons who have been adversely affected, will most probably be able to institute a claim against the funds should retroactive compensation not be paid,” Adv. Alberts said.