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The ‘Clean Break’ Principle

by | Jul 30, 2024 | Family Law | 0 comments

The clean break principle was first introduced by the Pension Fund Amendment Act 11 of 2007 and allows pension funds to deduct an amount or percentage from a member spouse’s pension benefit and transfer to the non-member spouse. The underlying philosophy of this principle is that the receiving non-member spouse utilises the portion transferred to him/her to become self-sufficient and fund his/her financial needs and obligations.

The term ‘pension fund’ is an umbrella term for all types of pension funds that falls within the scope of the abovementioned Pension Fund Act and includes provident funds, retirement annuities and preservation funds. The relevant pension fund can either transfer a specific amount or assign a percentage of the pension fund to the non-member spouse, depending on the wording of the final divorce order. It is important to note that the non-member spouse shall be liable for any tax deducted from the share assigned to him/her unless the divorce order states otherwise.

A pension fund can only give effect to the clean break principle if the final decree of divorce specifically orders the relevant pension fund to do so. The pension fund will be required to start the process of assigning a portion to the non-member spouse immediately upon receipt of the final divorce order rather than deferring payment until retirement of the member spouse.

Benefits of the ‘Clean Break’ Principle

  1. Financial Independence:
    The primary benefit of the ‘clean break’ principle is that it allows both parties to achieve financial independence. By severing financial ties, former spouses can move forward without ongoing financial entanglements.
  2. May Reduce Post-Divorce Litigation:
    Clear and definitive financial settlements may reduce the likelihood of post-divorce litigation.
  3. Certainty and Finality:
    A clean break provides certainty and finality to the divorce process. Both parties know their financial standing and are free from any ongoing financial ties and obligations to each other.

While the clean break principle offers certain benefits, including financial independence and reduced litigation, divorcing spouses are encouraged to consult with an attorney that specialises in family law for assistance and guidance.

Contact Curran Attorneys on (021) 671 9322 for assistance.