Spousal Support: Retirement and Pension Income

Do I have to keep paying spousal support after I retire?

A rising trend in family law is the phenomenon known as “grey divorces”: older couples separating after a long-term marriage. But how much support is a spouse obligated to provide when retirement is one or two chapters away and the ability to “turn over a new page” becomes significantly harder? In a previous post, we shared a primer on spousal support.

Pensions in Divorce: Property and Support

In a divorce, a pension can potentially play two roles. First, it is included as an asset in a net family property statement for the purposes of equalization. This means the spouse with the pension is generally expected to split the value of the pension accumulated during the marriage with their former spouse. At the same time, it is income, and the spouse with the higher income may be obligated to support their former spouse through spousal support.

When the payor spouse retires, their income may be entirely made up by their pension. So, they may be required to support their former spouse with an asset that they have already divided evenly. Depending on the length of the marriage, they may have shared the entire asset already.  This is known as double dipping.

Double Dipping and Grey Divorce

In Canada, the leading case on double dipping is the 2001 Supreme Court of Canada decision, Boston v Boston. In that case, the Court held that double dipping was generally unfair, stating that when a pension is divided, the recipient spouse has an obligation to make reasonable efforts to use the funds they received in equalization to become self-sufficient before the payor spouse retires and their pension kicks in. In effect, the recipient could create their own pension to provide for future support.

In grey divorces, however, the recipient may not have enough time to become self-sufficient, especially if retirement is only a couple years away. Additionally, when the payor retires, this material change in circumstance may allow them to seek a variation in their spousal support obligations. And so, with a recipient who has not had enough time to become self-sufficient and a payor who is receiving a decreased income (and may have already shared their entire pension in equalization), a court must determine whether spousal support is still appropriate for both spouses to live comfortably. Though double dipping is generally to be avoided, it may be permitted in certain circumstances if there are no other sources of income to be found.

Planning for the Future

A person can plan for retirement for decades, saving pay cheque after pay cheque, and aiming to retire as early as they can. But just as a decades long relationship coming to an end requires someone to re-evaluate their personal life, so too must they re-evaluate their financial life. Sometimes a retirement may need to occur a couple chapters later in life than expected, but this does not have to erase the happy ending.