HOW TO NAVIGATE PENSION FUND AND SEQUESTRATION IN S.A.?

There is nothing as daunting as hearing pension fund and sequestration in one sentence. Why? Because a pension fund is supposed to take care of you in your tender old age, and sequestration means that you declare bankruptcy. What will the effect of declaring bankruptcy have on your pension fund?

A common concern among retirees is, "What happens to my pension fund when I apply for sequestration?" To answer this question thoroughly, it’s essential to understand sequestration, when it should be considered, how it benefits pensioners, and how it impacts your pension fund.

In a perfect world, pensioners would have enough money in their old age to live comfortably while continuing to service the financial obligations they had before retirement. Unfortunately, this is not the case for many elderly consumers in South Africa.

Most retirees struggle to maintain the lifestyle they once enjoyed due to an insufficient retirement fund. Research shows that only 35% of retirees believe their retirement fund will last, while 2% already rely on family or government support.

South Africa’s government pension, administered by the South African Social Security Agency (SASSA), offers a maximum of R2,310 per month for consumers over 60, with a slight increase for those over 75. However, this amount barely covers living expenses, which often range from R20,000 to R60,000 per month.

Many retirees depend on private pensions, retirement annuities, personal investments, and property sales to supplement their income. Despite this, financial strain remains a major issue. In fact, 43% of South African adults provide financial support to their elderly parents while managing their own household expenses.

Sequestration in South Africa: What Does It Mean?
Sequestration is a legal process that allows over-indebted consumers to declare insolvency through a High Court application. It enables them to have debts written off, providing a structured path toward financial relief.

Why Should Pensioners Consider Declaring Insolvency?
After decades of hard work, many pensioners struggle to keep up with their financial obligations. Without additional income from overtime, performance bonuses, or danger pay, pensioners must rely solely on their fixed retirement fund. When debts become unmanageable, sequestration can provide an opportunity for financial recovery.   But what does this mean for my pension monies?

The Good News: Your Pension Is Protected
One of the biggest reliefs for retirees is that pension funds are excluded from the insolvent estate. Even if a consumer undergoes sequestration, creditors cannot use their retirement fund to settle debts.
Additionally, a pensioner’s salary or income is safeguarded, meaning garnishee orders are cancelled and interest on outstanding debt is frozen. This allows pensioners to start fresh without losing their retirement fund.

Key Benefits of Sequestration for Pensioners
Retirement comes with financial adjustments, and sequestration can help pensioners manage their money more effectively. Here’s how:

• Debt Relief – Sequestration allows debts to be written off, reducing financial pressure on retirees.

• No More Creditor Harassment – Once sequestration is granted, creditors must legally stop contacting the consumer.

• Frozen Interest on Debt – Unlike other debt relief solutions, sequestration prevents further accumulation of interest.

• No Monthly Debt Repayments – Pensioners can now use their income for essential living expenses.

• A Debt-Free Start – Sequestration provides pensioners with the chance to rebuild their financial stability.

• Stops Legal Action – The sequestration process halts all legal collection efforts, ensuring that creditors cannot pursue garnishee orders or court judgements.

The Elderly Act
The Elderly Act protects elderly consumers by ensuring their dignity, safety, and access to essential services. Some key provisions include:

• Protection of Rights – Safeguards against abuse or financial exploitation.
• Community-Based Care – Encourages independence through support services.
• Regulated Residential Facilities – Ensures proper care for elderly consumers.
• Financial Security Measures – Provides access to social grants and financial assistance.
• Legal Safeguards – Prevents unfair discrimination based on age.

PENSION FUND ACT: SECTION 37A

Section 37A of the Pension Funds Act in South Africa protects retirement benefits from being used to settle debts. The law ensures that pension funds serve their intended purpose—providing financial security for retirees—rather than being seized by creditors.

Key Provisions of Section 37A

• Protection Against Creditors:

Retirement benefits cannot be attached, reduced, transferred, or pledged to pay off debts.

• Exceptions: 

Certain deductions are permitted, including housing loans, maintenance payments, and tax obligations.

• Legal Safeguards:

Pension funds cannot be used as security for debts, ensuring that retirees retain their financial stability.

• Restrictions on Fund Payments:

If an attempt is made to attach or execute a judgement on a pensioner’s benefits, the fund can withhold or suspend payment.

While Section 37A aims to protect pensioners from financial exploitation, creditors and attorneys often find legal loopholes to pursue garnishee orders or enforce debt collection through court rulings. This means that, despite legal protections in Section 37A, retirees may still face financial challenges.

Sequestration stops all legal action including legal debt collection processes.
Unlike the Older Persons Act, sequestration completely halts all legal action. Once a High Court approves a sequestration application, creditors cannot pursue legal collection efforts such as garnishee orders or court judgements.

Sequestration gives pensioners a clean financial slate and take away the power from the creditors to harass and traumatise the elderly, since they must follow the claims process and can no longer proceed with legal collection processes against the consumer.

The Sequestration Process: How Pensioners Can Apply
If a pensioner’s liabilities exceed their assets, they can apply for voluntary sequestration in the High Court of South Africa. A trustee is then appointed to oversee the administration of the insolvent estate.

In Conclusion:

Sequestration can seem intimidating, but it offers pensioners a lifeline. Knowing that retirement savings remain protected can provide much-needed peace of mind.
Although the Older Persons Act aims to protect retirees, creditors continue to find ways to enforce garnishee orders and recover debts. Only sequestration guarantees full protection from legal collection processes.
If you're considering sequestration, it’s best to seek professional advice to fully understand its implications and explore alternative debt relief solutions.

Read our stellar reviews on Hello Peter, with clients praising us for our personal advice, efficiency, and professionalism. Our success rate and reputation in South African courts speak to their expertise and ability to help individuals achieve financial relief.

Declaring insolvency is a significant financial decision, but with the right guidance, it can provide a fresh start. We've built a reputation as one of South Africa’s foremost insolvency experts, assisting clients from across the country in regaining financial stability. Our high success rate and positive client feedback make us a trusted choice for those seeking insolvency solutions.

If you are a retiree and are considering insolvency, seek professional advice from us. We can help you navigate the process with confidence.

Need Help? CureDebt Can Assist!

Cure Debt specialises in sequestration and rehabilitation services that help South Africans regain financial stability. If you’ve gone through sequestration and want to restore your credit profile, we can guide you through the rehabilitation process and help you take control of your financial future.



Conclusion: A Second Chance at Financial Success
Rehabilitation after sequestration is a powerful tool for individuals looking to rebuild their financial lives. With the right guidance, credit restoration, property ownership, and financial independence are all achievable. If you’re ready to take the next step, CureDebt is here to help you navigate the process and secure a brighter financial future.