Pensions and Benefits Law Blog

Pensions and Marriage Breakdown: The “Double Dipping” Dilemma

Mar 21, 2017 4 MIN READ

What is Double-Dipping?

“Double dipping” or “double recovery” refers to a situation where, on marriage breakdown, one spouse’s pension is taken into account as a capital asset, for family property equalization purposes, and following division of the pension, the remaining portion of the spouse’s pension is taken into account again as income, for support purposes.

2001 – The Supreme Court Rules on Double-Dipping

The leading case on the issue is Boston v. Boston, a decision of the Supreme Court of Canada from 2001.  In that case, the Court held that when a pension is divided for equalization purposes, the payee spouse has an obligation to make a reasonable attempt to generate income with the assets received, at least by the time the payor spouse retires and starts to receive a pension.  The Court stated that it would be unfair for the payee spouse to be permitted to retain the pension asset received upon equalization, instead of trying to generate an income from it, while the remainder of the pension retained by the payor spouse begins to liquidate on retirement.  The Court stated that “the ideal would be if the payee spouse generated sufficient income or savings from her capital assets to equal the payor spouse’s pension income.  …  [T]he payee spouse must use the assets received on equalization to create a “pension” to provide for her future support.”  In other words, it is unfair for the spouse who received a share of the pension for equalization purposes to look to the payor spouse for support based on the payor spouse’s pension income, without making a reasonable attempt to generate income from the assets received.

The Court held that double dipping – allowing “the payee spouse to reap the benefit of the pension both as an asset and then again as a source of income” – is “generally unfair”, particularly so where the payee spouse retains the asset and does not make a reasonable attempt to convert it into income, and that the courts should therefore focus on the assets of the payor spouse that were not subject to division when assessing that spouse’s ability to pay support.  The Court went on to state, however, that double dipping cannot always be avoided, and may be reasonable in some circumstances:  namely, “where the payor spouse has the ability to pay, where the payee spouse has made a reasonable effort to use the equalized assets in an income-producing way and, despite this, an economic hardship from the marriage or its breakdown persists.”  Thus, double-dipping is to be avoided, but cannot be ruled out in all cases.

Recent Case Revisits the Double-Dipping Issue

In the recent case of Melis v. Zwanenburg, the Ontario Superior Court of Justice again considered the issue of double-dipping.  Melis (the wife) and Zwanenburg (the husband) were married in 1986 and separated in 2004.  At the time of their subsequent divorce, the wife was ordered to pay the husband spousal support in the amount of $3,200 per month.  The husband also received an equalization payment, including a lump sum amount from the wife’s federal government pension of approximately $217,000.  When the wife subsequently retired, she sought a variation in the spousal support amount, given the change in her income.

The Court held that the husband was entitled to continuing support, as he had “sacrificed his career to take care of the [sic] their child and allow [the wife] to further her own career”.  The central issue in the case was whether in determining the quantum of support, the Court would take into account the portion of the pension retained by the wife following the division of the pension at the time of the parties’ marriage breakdown.  Citing Boston v. Boston, the Court held that it was required to focus on the portion of the wife’s assets that were not part of the equalization, in determining the amount of support payable.  While the Court found that the husband had in fact made a reasonable effort to produce an income from the assets he received for equalization, it nevertheless held that an appropriate support order could be made without taking into account the portion of the wife’s pension that she retained.  Therefore, the Court did not have to resort to “double-dipping” in order to make an appropriate support order.  Boston v. Boston remains good law:  double-dipping is generally to be avoided, but may be permitted in certain circumstances.