Conversion of Existing Divorce Debt to Reduction in Member Service Period

Divorce Debt

As you may be aware, when GEPF is required to pay a portion of the pension interest to an ex-spouse (non-member) on an instruction in the divorce decree, a debt is created against the member. This debt plus interest must be repaid by the member. Read more.

Change To GEPF Law

A change to the Government Employees Pension Law was recently approved, whereby the debt that accrues to a member of the GEPF, will be replaced by a reduction in the service period used to calculate the exit benefit of a member.

What Are The Implications Of This Change?

  • Payment will still be made to the ex-spouse according to the divorce decree
  • GEPF will reduce the service year of the member proportionally to cancel the debt plus interest accrued by the member

The service reduction approach holds an advantage for the member, thus the GEPF made provision for the members who still have outstanding divorce debt, to convert to the service reduction approach.

How It Works

In the coming month(s) members who do have divorce debt will be contacted by the GEPF in writing informing them about how these changes are going to affect their pensions and service period. Members will be allowed the opportunity to opt from the old divorce debt model or the service reduction model. The affected members will have up until the 22 May 2020 to indicate their choice of either remaining with the debt and interest model or move to the service adjustment model approach. Currently affected members who fail to indicate their choice by 22 May 2020 will automatically be converted into the new approach. Post 22 May 2020 all members who have a legal divorce claim against their pension will be subjected to the service reduction model.

What If You Already Have Outstanding Divorce Debt

The following will apply to members who still have outstanding divorce debt:

  • The GEPF will provide you with a summary of your debt.
  • Interest will be calculated that accrued on the debt up to 31 December 2019 as well as the debt that will accrue up until retirement date.
  • A service reduction calculation will also be done up until 31 December 2019.
  • GEPF will provide affected members with a summary of what the debt and benefits will be on retirement compared to what the benefit will be on retirement date should the member opt for service reduction.
  • Members will then have the option to indicate whether they wish to remain on the debt model or convert to the service reduction model by means of complete a “Choice Form” (supplied by GEPF).
  • Once a member has exercised their choice, the position is irreversible
  • Members will receive confirmation of their debt balance and/or service period.
  • Membership certificates will be updated to reflect the member’s choice.

What About New Divorces

Post 22 May 2020 all members who have a legal divorce claim against their pension will be subjected to the service reduction model.

Sourcs: http://www.gepf.co.za/index.php/news/article/gepf-change-rules-regarding-pension-debt-divorce

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