Pension Benefits - Toronto Estate Law Blog

Is Your Pension Plan Enough?

Hull and Hull LLP — Wed, 26 Oct 2011 04:00:40 -0500

I can recall various conversations with my grandparents about what it’s like to live into your 80s and 90s. The responses varied on the day and the specific topic of discussion, but there was always an undercurrent that life was worth living, and that extending life was a good thing. The dreams you have for your ‘elder years’ may be diverse or focused, but how you are going to support those plans is something you may already have banked on, literally and figuratively. For many Canadians, their retirement plan includes a pension, and a reliance on those funds to live the life of freedom they have long worked hard for, and for some, the pension is the lifeline and the only means by which they will financially survive. Yet, in the ever changing economy, and in planning for the future, how much consideration ought to be given to the pension plan’s investment strategy when planning for your life?

Statistics Canada reports that between 1950–1952, the average life expectancy for a Canadian Male was 66 years and 71 years for a female. The life expectancy for the average Canadian now, is 79 years for a male and 83 years for a female. Life expectancy in Canada may surpass 90 years by 2100. This increase is substantial, and most everyone in the country breathes a sigh of relief to know that we have those precious extra years to spend with our loved ones in retirement, as noted, many relying on pensions to survive. Yet, as recently reported in the Globe and Mail, more than $1-trillion of Canadian pension assets and annuity reserves face longevity risk[1]. As we live longer, we are putting our pension plans, many created and based on historical valuations, together the security they provide, at risk. The solutions to this problem are far reaching and there are certainly those who will be focussing their attention on this particular field in the near future, perhaps, in an ironic twist, exploring this potential financial deficit will be of financial benefit to some.

I suppose the most important question for the moment is whether the pension plans will have sufficient funds to pay out on their obligations, and how will this interplay impact your estate planning and livelihood.

Thanks for reading,

Nadia M. Harasymowycz - Click here for more information on Nadia Harasymowycz.

[1] As noted by Reinsurer Swiss Re

A Release Does Not Necessarily Constitute a Waiver of Claims to Pensions

Hull and Hull LLP — Wed, 09 Mar 2011 00:00:00 -0500

In King v. King, an ex-husband brought an application for a declaration that his former wife waived her entitlement to his survivor’s pension by way of a separation agreement that contained a release by the wife of any claim or interest in the pension.

Section 24 of the Pension Benefits Act establishes a joint and survivor pension in the case where a former member has a spouse on the day that the first instalment of the pension is due to be paid. Because the first instalment of the pension was due at the time that the ex-husband was married to his second wife, the pension became a joint and survivor pension.

However, the separation agreement does not resemble the statutorily required Form 3. As such, the ex-husband cannot rely on the Act’s exception that would have been grounds for a declaration that there was a waiver of the wife’s entitlement to the pension. Justice Cornell remarked that “given the mandatory requirement that in order for the waiver to be valid, the prescribed form must be used, Mr. King has found himself in the unfortunate position of being caught in a trap for the unwary”.

To avoid such problems, those drafting separation agreements should be aware of the specific legal requirements regarding particular types of pensions.

Note also that Form 3 was revoked in 2000, so going forward, this is not likely a restriction.

Sarah Halsted - Click Here For More Information About Sarah Halsted

PENSION PLANS AND TRUST LAW

Hull and Hull LLP — Tue, 26 Sep 2006 00:09:19 -0500

The Supreme Court of Canada ("SCC") recently considered the interplay between traditional trust law and closed pension plans. In Buschau v. Roger Communications Inc. [2006] S.C.J. No. 28, the SCC held that members of a closed pension plan could not rely on traditional trust law principles to require the termination of the pension plan and distribution of its surplus.

Pension plans have their own set of unique contractual and legislative rules that operate outside of traditional trust law. In Buschau v. Roger Communications Inc., members of a closed pension plan registered under the Pensions Benefits Standards Act, 1985, sought to terminate the underlying trust of the plan and distribute surplus assets in the plan on the basis of the rule in Saunders v. Vautier.

According to that common law rule, the terms of a trust can be varied or the trust terminated if all beneficiaries of the trust, being of full legal capacity, consent. The SCC held that members of the pension plan could not invoke the rule in Saunders v. Vautier to terminate the trust. It required that beneficiaries seeking early termination possess the sum total of vested, not contingent, interest in the trust corpus. The members did not have absolute entitlement to the surplus until the pension plan and trust were terminated.

]]>The common law rule further required the consent of all parties who had an interest in the trust property. The court could not consent on behalf of current spouses and common law partners who were of full legal capacity, nor could consent be given on behalf of unascertainable future spouses and common law partners, since termination was presumably not in their best interests.

Moreover, applying the rule in Saunders v. Vautier would contradict the reasonable contractual expectations of the parties, since the terms of the pension plan did not give rise to a reasonable expectation that the members could terminate the trust over the employer's objections so that they might obtain the surplus. Simply put, the rule in Saunders v. Vautier could not be easily incorporated into the context of employment pension plans. According to the court, such plans were heavily regulated. The Pensions Benefits Standards Act, 1985 dealt extensively with the termination of plans and the distribution of assets. It was clear from this explicit legislation that Parliament had intended its provisions to displace the common law rule in Saunders v. Vautier.

Have a great day. Justin de Vries --------