Pension benefits can be attached for

maintenance
RETIREMENT / 14 MAY 2012, / LAURA DU PREEZ


If you are not being paid maintenance to support your child, you can consider having
the defaulting parent’s pension benefits attached to cover the arrear payments – and
possibly even future maintenance payments.

The attachment of pension benefits is a very effective tool, given the large number of
maintenance defaulters, Muthundinne Sigwadi, associate professor of law and head of
the mercantile law department at the University of South Africa, told the annual
conference of the Pension Lawyers Association.

Attaching retirement fund benefits helps children and spouses who are usually faced
with the daunting task of ensuring that the defaulting parent complies with his or her
maintenance obligations, he says.

The Maintenance Act and the Pension Funds Act give a retirement fund the right to
withhold or deduct amounts from pension benefits to pay maintenance to a child, and
this grants applicants a mechanism to enforce a maintenance order, Sigwadi says.

In terms of the Pension Funds Act, retirement savings can be attached or ceded only for
limited purposes, including to pay outstanding tax or maintenance.

A parent, typically a mother or caregiver, seeking regular payments to support a child

needs to obtain a maintenance order against the other parent, typically the father, from
a maintenance court. The court will consider the needs of the child and the parent’s
ability to contribute.

If the parent fails to adhere to the order and pay the maintenance on the due date, he or
she has 10 days to rectify this. If the maintenance is still not paid, the caregiver or the
other parent can go back to court and ask for the maintenance order to be enforced.

To enforce the order, the court can order that the defaulting parent’s property is
attached or issue an order to his or her employer to deduct the maintenance directly
from the defaulting parent’s salary.

Some defaulting parents try to hide their assets or resign from their jobs to avoid paying
maintenance – and this is when you may need to get what is due to support a child from
the defaulting parent’s retirement fund.
If a fund is making ongoing payments to a pensioner, you can seek a court order
directing the fund to deduct what is due for maintenance and to pay it over, Sigwadi
says.

If a maintenance defaulter is still an active member of a fund, the fund cannot make any
deductions for outstanding maintenance payments until the member’s benefit in the
fund accrues, he says. This will occur when the member retires, resigns or is
retrenched, in which case the fund will pay out a retirement or withdrawal benefit.

If a parent has a history of defaulting on his or her maintenance payments, you may be
able to have his or her retirement fund benefits attached to cover future maintenance
payments.

The law is not clear when it comes to attaching retirement fund benefits to cover the
future maintenance of a child, Sigwadi says. However, a few cases have established
that the courts will entertain orders to attach fund benefits for the future maintenance of
a child.

In 2003, a woman approached the Durban High Court (Mngadi v Beacon Sweets and
Chocolates Provident Fund) seeking the enforcement of a maintenance order for her
two children. The father was a member of the Beacon Sweets and Chocolates
Provident Fund. He had resigned to avoid paying maintenance and planned to withdraw
his benefit, the court heard.

The court ruled the fund could be interdicted from paying the benefit to the member for
as long as the member was liable for maintenance, and it ordered the fund to deduct
from the benefit the maintenance due each month.

The court said that once the maintenance was no longer due – for example, when the
children reached the age of majority – the member could be paid the remaining benefit.

In a 2004 Cape High Court case (Magewu v Zozo), a member of the Telkom Retirement
Fund was retrenched. Although the member was not in arrears with his maintenance
payments at the time he was retrenched, the mother of his child had previously had to
obtain an emolument order against his salary to force him to pay maintenance.

The court granted an order instructing the fund to withhold the retirement fund benefit
and directing it to pay the maintenance monthly.

In 2008, the Pension Funds Act was amended, allowing retirement funds to reduce or
settle debts relating to the limited circumstances in which deductions can be made from
funds.

In The Pension Funds Act: A Commentary, Rosemary Hunter et al interpret this to mean
the fund can reduce or settle debts for maintenance, including future debts for
maintenance.
What you need to lodge a claim

Before you can apply to have a retirement fund member’s benefits attached to pay
outstanding maintenance, you must be in possession of a valid maintenance order.
Then you will have to approach a competent court.

The fund and the defaulting member should be identified to facilitate easy payment,
Muthundinne Sigwadi, associate professor of law and head of mercantile law at the
University of South Africa, says.

Maintenance orders presented to retirement funds often do not cite the fund correctly,
and most funds take the view that the fund must be cited before it will pay out, he says.

If a fund is presented with a maintenance order that does not cite the fund and the
amount outstanding, the fund has no way of knowing what maintenance payments have
been made and what is outstanding.

To obtain the order attaching the retirement fund benefits, you will have to show that the
member has a history of failing to take his or her maintenance obligations seriously,
Sigwadi says.

A major obstacle to the attachment of pension benefits is that many funds are presented
with a maintenance order too late to give effect to it because the member has already
left the fund, he says.

Once the retirement benefit has been paid to the member, the benefit is no longer in the
hands of the pension fund and it cannot attach the benefit.

You will then have to pursue an action against the defaulting member and his or her
bank, Sigwadi says.

Sigwadi says an argument can also be made for a fund to withhold a member’s benefit
pending the finalisation of a claim for arrear maintenance.

A Supreme Court of Appeal case confirmed that a fund can withhold a member’s benefit
pending the finalisation of a claim for damages allegedly suffered by the member’s
employer, as in the case of theft. This ruling could be used to argue that a fund may
withhold a benefit pending the finalisation of a maintenance claim, he says.

Therefore, if you know that a defaulting parent is, for example, going to leave his fund,
you should ask the fund to withhold his or her benefit while you finalise a claim for
arrear maintenance.

Sigwadi says the Maintenance Act is silent on the subject of a retirement fund’s duty to
inform a defaulting member before it pays a maintenance claim. But this does not mean
the benefits should be attached without the fund notifying the member. If the fund did
so, it would infringe the common law principle of allowing the other side to be heard,
Sigwadi says.

In a 2006 case (Louw v Louw), the High Court set aside an order where a magistrate’s
court had ordered the attachment of a member’s pension benefit for arrear maintenance
without prior notice to the member.

Before paying out a maintenance claim, a fund must deduct the outstanding balance on
any home loans that it granted in terms of the Pension Funds Act. The amount for the
maintenance order must be deducted before any awards in a divorce order are
deducted, Sigwadi says.

Banks cannot attach pension account to

recover loan dues: HC
SPECIAL CORRESPONDENT-HINDU
MADURAI:, DECEMBER 03, 2015

A Savings Bank account maintained primarily for the purpose of depositing

monthly pension amount could not be attached by a bank just because the
account holder had defaulted repayment of a loan availed from the same
institution, the Madras High Court Bench here has held.
Justice K. Ravichandra Baabu passed the order while allowing a writ petition
filed by A. Muthuiruvakkal of Nagercoil in Kanyakumari district. She had
challenged an order passed by a nationalised bank on August 13 preventing
her from operating the pension account for recovering the outstanding loan
amount.
“If there is any outstanding due payable by the petitioner, it is for the
respondent bank to work out its remedy in the manner known to and
permissible by law before the appropriate forum. Without doing so, resorting
to attach the pension amount by way of passing the impugned order is
impermissible,” he said.
The judge set aside the bank’s order and directed it to permit the petitioner to
operate the account without any hindrance. He relied upon a judgement
passed by the Supreme Court in 2009 to hold that pension and gratuity
amount could not be attached for recovery of dues.
 In that judgement, the apex court had criticised the Rajasthan High Court for
ordering attachment of even Fixed Deposits without giving attention to the
fact that the loan defaulter in that case had actually converted his pension and
gratuity amount into fixed deposits.
In the present case, Ms. Muthuiruvakkal had claimed that the bank had
deducted about Rs.14,681 from her pension account after preventing her from
operating the account. On its part, the bank stated that it had no other option
but to pass the order under challenge to recover the dues.

Bank can recover loan dues from

debtor's SB account: HC
PTI | Jun 18, 2016, TOI

Madurai, Jun 18 () If a debtor failed to settle the loan dues despite reminders from the
bank, then the money could be recovered from his savings bank account, ruled
the Madras High Court bench here today.
Justice M Venugopal dismissed a writ petition filed by a retired Tamil Nadu
Electricity Board employee, who sought to restrain a nationalised bank from
recovering the farm loan dues from his pension amount in the savings bank account.
The court observed that the bank was right in recovering the due amount from his
savings bank account as per the mandate given by him at the time of availing the loan.
The petitioner and his son had jointly availed Rs 75,000 as farm loan from the bank in
October, 2012, agreeing to repay it in 10 monthly instalments from April, 2015, after
the holiday period of two years.
The judge said since they failed to repay the loan despite several reminders and only
after it became a Non-Performing Asset, the bank was constrained to explore the
possibility of recovering the amount as per loan agreement.
It was the duty of the petitioner and his son to repay the loan instalments and they
could not wriggle out of the situation, the judge said.
Bank can recover loan dues
from debtor’s SB account:
Madras HC
Dismissing a writ petition, Madras High Court said that it was the duty of the
petitioner to repay loan installments.
By: PTI | Madurai | Published: June 18, 2016 INDIAN EXPRESS

While hearing a writ petition, the Madras High Court observed that the bank was right in recovering
the due amount from the petitioners savings bank account as per the mandate given by him at the
time of availing the loan. (Source: File photo)
If a debtor failed to settle the loan dues despite reminders from the bank, then the money could
be recovered from his savings bank account, ruled the Madras High Court bench in Madurai on
Saturday.
Justice M Venugopal dismissed a writ petition filed by a retired Tamil Nadu Electricity Board
employee, who sought to restrain a nationalised bank from recovering the farm loan dues from
his pension amount in the savings bank account.
The court observed that the bank was right in recovering the due amount from his savings bank
account as per the mandate given by him at the time of availing the loan.
The petitioner and his son had jointly availed Rs 75,000 as farm loan from the bank in October,
2012, agreeing to repay it in 10 monthly instalments from April, 2015, after the holiday period of
two years.
The judge said since they failed to repay the loan despite several reminders and only after it
became a Non-Performing Asset, the bank was constrained to explore the possibility of
recovering the amount as per loan agreement.
It was the duty of the petitioner and his son to repay the loan instalments and they could not
wriggle out of the situation, the judge said.
 Failed to settle loan, banks will
now recover dues from your
savings account: HC
Madurai: If a debtor failed to settle the loan dues despite
reminders from the bank, then the money could be recovered
from his savings bank account, ruled the Madras High Court
bench today.

Justice M Venugopal dismissed a writ petition filed by a

retired Tamil Nadu Electricity Board employee, who
sought to restrain a nationalised bank from recovering the
farm loan dues from his pension amount in the savings
bank account.
The court observed that the bank was right in recovering
the due amount from his savings bank account as per the
mandate given by him at the time of availing the loan.
The petitioner and his son had jointly availed Rs 75,000 as
farm loan from the bank in October, 2012, agreeing to
repay it in 10 monthly instalments from April, 2015, after
the holiday period of two years.
The judge said since they failed to repay the loan despite
several reminders and only after it became a Non-
Performing Asset, the bank was constrained to explore the
possibility of recovering the amount as per loan
agreement.
It was the duty of the petitioner and his son to repay the
loan instalments and they could not wriggle out of the
situation, the judge said.

Pension, gratuity cannot be attached for

debt recovery: SC
Pension, gratuity cannot be attached for debt recovery: SC
PTI

Wed, Dec 03 2008.

New Delhi: The Supreme Court (SC) has held that retirement benefits like
pension and gratuity cannot be attached by authorities for recovery of dues.

The apex court passed the ruling while quashing a Rajasthan High Court
ruling which had ordered attachment of the retirement benefits of Radhey
Shyam Gupta, who was a guarantor in a mortgage deal.

The High Court had ordered attachment of Gupta’s retirement benefit

deposited in the Punjab National Bank (PNB) as principal debtor Durga
Prasad, for whom he stood guarantor for a loan of Rs83,000, defaulted in the
repayment of the loan taken for a vehicle. The vehicle mortgaged by Prasad
was also untraceable.

The High Court ordered the attachment of retirement benefits after recording
the submission of the bank that the matador van of Prasad which was
mortgaged was not traceable. It also ordered Gupta to produce the matador
vehicle so that it could be auctioned and the loan amount recovered.

Aggrieved by the ruling, Gupta filed a special leave petition in the apex court.

The apex court agreed with the submission of Gupta’s counsel Shobha that
proviso (g) of Section 60(1) of the civil procedure code precluded the
authorities from attaching retirement benefits of a person.