News Articles

Sharing Your Pension Twice

Under Alberta's Matrimonial Property Act, a spouse's employment pension is considered to be property and divided as an asset between the spouses upon separation and divorce.  Problems may arise where a pension is first divided as an asset and then later divided again as income for the purposes of determining spousal support upon the retirement of the person paying spousal support.  This is commonly referred to as "double dipping".

Fortunately, in Alberta the legislature has seen fit to permit many employment pensions to be divided between the spouses at source, thus providing both spouses with an income stream upon the retirement of the payor spouse.  This frequently avoids any possibility of double dipping by the recipient spouse, but does not guarantee that the same could occur.

The Supreme Court of Canada had opportunity to deal with this issue head-on last year in a case originating from Ontario.  Ontario's legislature has not seen fit to pass legislation like Alberta's to permit the division of pensions at source.  Prior to the Supreme Court's ruling in Boston v. Boston, Courts were dealing with this issue in a number of different, and inconsistent, ways:

1. The entire pension income stream was taken into account to determine spousal support (double dipping);
2. The entire pension income stream was excluded from being taken into account to determine spousal support;
3. A portion of the pension income stream was included to determine spousal support.

The Supreme Court has tried to standardize the Court's approach to this issue in its decision in Boston v. Boston.  The resulting general rule is that a Court should not re-divide an income stream as support that was previously included and divided in the property division.  The rationale is simple - it is unfair to force a payor spouse to continue to pay spousal support from an income stream that had been previously valued and divided and it was unfair to permit the recipient spouse to retain the assets they received in exchange for the pension in the original division of assets, while forcing the payor to convert his assets (ie. collecting the income stream from the pension).  The payor has received an asset that has some future value, however, one that cannot be used or enjoyed until later.  The recipient spouse on the other hand receives the immediate benefit of the assets received in the division of property.

Where the pension was divided at source, that portion of the payor's income stream would be excluded from consideration by the Court in determining what, if any, ongoing obligation the payor spouse had to the recipient spouse for support.  Thus, upon a payor spouse retiring, the Court shall only look at the portion of his or her income that results from assets not previously divided in the divorce or separation (assuming of course a case can be made out for ongoing spousal support).

The Supreme Court did point out that there may be cases where double dipping may be permitted.  Under this exception, the recipient spouse would have to prove that they suffered economic disadvantage that was not fully addressed in the separation, that the payor spouse can afford to pay spousal support after considering his needs, and that the recipient spouse has made reasonable efforts to earn income from the assets they received in the separation. Thus should a recipient spouse have insufficient income to maintain himself or herself after considering their income streams from post-separation and earlier equalized assets, they should be entitled to spousal support.  If the payor spouse cannot afford to pay from the income stream of post-separation assets, they will be expected to have their equalized assets included in determining the level of maintenance required.

The moral of this story?  Should you have an employment pension, or a right to share in one, you should carefully consider the options which will be right for you with your legal counsel as you may be surprised upon retirement what other obligations or entitlements you may have.

By Jim Glass
January 23, 2002