Does your pension payments form part of your insolvent estate?

10 February 2021 446
“I am on the verge of being declared insolvent. In the next few years I will receive pension payouts from my pension fund. I am concerned, though, that my pension will also fall into my insolvent estate and I will lose my pension? Will this happen?”

Upon the sequestration of an individual, the estate of such individual vests with the Master, until a Trustee is appointed for the estate. Thereafter the estate vests in the Trustee. Section 20 of the Insolvency Act regards the following as being part of the estate:

“(a) all property of the insolvent at the date of the sequestration, including property or the proceeds thereof which are in the hands of a sheriff or a messenger under writ of attachment; 
(b)  all property which the insolvent may acquire or which may accrue to him during the sequestration….”

However, Section 37B of the Pension Funds Act 24 of 1956, creates an exclusion from this general provision and determines that the pension fund of an insolvent individual may not be attached by a Trustee of an insolvent estate while those funds are still in the hands of the pension fund. This means that if the pension fund has not yet paid out at the date of sequestration, the pension payments will not fall into the insolvent estate.

But, this position changes once those funds have been paid out to the insolvent estate prior to the date of sequestration. In this situation the pension payments will form part of the insolvent estate. 

In your case therefore, your future pension payouts will be protected from falling into your insolvent estate by virtue of Section 37B of the Pension Funds Act.