The PFAA inserted a definition for "Income Tax Act" and introduced the following definitions into the Pension Funds Act, each cross-referenced to the corresponding definition in the Revenue Laws Amendment Act No. 12 of 2024: "member's interest in the retirement component", "member's interest in the savings component", "member's interest in the vested component", "retirement component", "savings component", "savings withdrawal benefit", and "vested component".
Section 14B of the Pension Funds Act deals with the determination of a member's individual account and minimum individual reserve. The PFAA amended the formula for defined contribution funds by specifically adding a savings withdrawal benefit as a permissible debit under the "OC" (other credits and debits) element. For defined benefit funds, a new subparagraph (iii) was added to reduce pensionable service — or the minimum amount payable based on member contributions — to account for any savings withdrawal benefits already paid to the member.
Before the PFAA, section 37A of the Pension Funds Act allowed for a reduction of a member's benefit only in terms of the Pension Funds Act itself, the Income Tax Act, and the Maintenance Act. This meant that arrear taxes collectible under the Tax Administration Act No. 20 of 2011 — through an IT88L issued under section 179(1) of that Act — were not permitted as deductions from a fund benefit, because the Tax Administration Act was not included in the list of enabling Acts.
The PFAA amended section 37A to include the reduction of a benefit in terms of the Tax Administration Act, and made the same addition to the introductory paragraph of section 37D(1)(a). Arrear taxes may now be deducted from a member's fund benefit.
Section 37D allows the following deductions from a member's benefit, in order of preference:
Section 37D(1B) limits the aggregate of all deductions to the value of the member's individual account or minimum individual reserve.
A fund may provide a direct housing loan or guarantee to a member only where the loan is used to settle an existing housing loan, purchase a house or stand, or make additions or alterations to a house. The property must be owned by the member and/or their spouse and must be occupied by the member or their dependant.
The PFAA aligns section 19(5)(c) with Regulation 28 (as amended from 3 January 2023), confirming that a housing loan or guarantee may not exceed 65% of the member's individual account or minimum individual reserve in the savings, retirement and vested components combined. Paragraph (d), which previously allowed a fund to increase the threshold to 100% in certain circumstances, is deleted. The 65% threshold is applied to the net housing loan amount (net of income tax).
Before 1 September 2024, section 37D(1)(b)(i) allowed a fund to deduct housing loans or guarantees provided by an employer. The PFAA removes this deduction. A fund may not deduct an amount payable to an employer in respect of a housing loan or guarantee provided by that employer. Housing loans for which the fund itself acted as guarantor continue to qualify as a permitted deduction under section 37D(1)(a)(ii).
The PFAA introduces the deduction of amounts awarded to a maintenance claimant under an interim maintenance order granted by a court under rule 43 of the High Court rules or rule 58 of the Magistrates' Court rules. These orders apply from the date of grant until a divorce is finalised, at which point they are replaced by the divorce order.
Prior to 1 September 2024, there was doubt about whether future maintenance could be deducted from a fund benefit without establishing mala fides on the member's part. Following Mngadi v Beacon Sweets [2003] and Sentinel Retirement Fund v Mtambo [2015], the position was uncertain. The PFAA resolves this: a fund may now give effect to a deduction of future maintenance from a member's individual account or minimum individual reserve without having to investigate the member's intent. Arrear maintenance must be paid as a lump sum. Future maintenance may be paid in monthly instalments directly to the claimant or as a lump sum to a beneficiary fund, which then deals with monthly payments to the claimant. There is currently no guidance on how the beneficiary fund should administer such payments.
The prohibitions in sections 37D(3)(aD) and (aE) apply only to savings withdrawal benefits. A pre-retirement withdrawal from a preservation fund's vested component cannot be suspended on this basis.
The PFAA introduces a single definition of "pension interest" into the Pension Funds Act that applies across all fund types. It is defined as the member's individual account or minimum individual reserve, as the case may be, determined in accordance with the fund's rules on the date of the court order — in other words, the member's benefit in the fund on the date of divorce. This definition also applies to court orders made in respect of the division of assets in a religious marriage (for example, a Muslim marriage). In the event of a conflict between the Pension Funds Act and the Divorce Act, the Pension Funds Act prevails [new section 2(6)].
Where a divorce order refers to pension interest as defined in the Divorce Act, a retirement annuity fund must do two calculations: first, calculate the member's pension interest under the Divorce Act definition (contributions plus simple interest at repo + 3.5%) to establish what the non-member spouse is entitled to; second, calculate the member's pension interest under the Pension Funds Act definition (the individual account/minimum individual reserve) to establish the maximum the fund may deduct. The fund may not deduct more than the lesser of the two results.
Section 37D(aA) prohibits a fund from allowing a member to take a savings withdrawal benefit where the fund has received written notice from either party that divorce proceedings have been instituted that will result in a division of the member's pension interest, unless the non-member spouse's consent has been obtained. This prohibition remains until the proceedings are finalised or a court order is issued.
An order that does not meet these requirements remains valid but is not enforceable against the fund. It cannot be rectified by agreement between the parties — an amended court order is required.
The non-member spouse may have the assigned amount paid to them directly (taxed as a resignation benefit in their hands), or request that it be transferred to an approved retirement fund on their behalf (tax-free on transfer). Any pension interest deduction must be done proportionately across all three components.
Section 37D(1)(b) does not apply to retail funds (preservation funds and retirement annuity funds), as there is no employer participating in those funds. It applies to occupational funds only.
The fund has the right to withhold payment of a member's benefit pending finalisation of an employer's damages claim, but only after applying the audi alteram partem rule and balancing the member's and employer's competing interests (Highveld Steel and Vanadium Corporation Ltd v Oosthuizen [2008] ZASCA 164).