British Columbia Law Institute Report on Pension Division Between Separating Spouses

The British Columbia Law Institute (BCLI) has published a report on Pension Division: A Review of Part 6 of the Family Law Act:

"When a spousal relationship breaks down, the separating spouses are often faced with trying emotional, financial, and legal issues. This report is concerned with one set of legal issues that may arise from the breakdown of a spousal relationship. These legal issues involve the division of a pension between the separating spouses."

"British Columbia has had pension-division legislation in force since July 1995. It has generally worked well, fulfilling its purpose to provide British Columbia with a comprehensive and detailed set of rules on pension division, largely sparing the courts from having to settle, in litigation, issues that call for specialized expertise. Part of the success of this legislation can be attributed to the fact that it has been regularly reviewed and improved, to keep pace with developments in family and pension law."

"The latest version of British Columbia’s pension-division legislation is found in part 6 of the Family Law Act. This legislation has been in force since March 2013. There have been some significant developments in family and pension law since that time. The time is ripe for another review of pension-division legislation."

"This report contains that review. It has found that the legislation is still working well in general. But specific areas can be improved. These improvements are set out in the report’s 25 recommendations for reform."

The recommendations deals with issues such as the death of a spouse; waiving survivor benefits after pension commencement; commuted value: disability benefits; locked-in retirement accounts and life income funds; private annuities; and administrative fees.

More details about the Pension Division Review Project are available on the BCLI website.

Manitoba Law Reform Commission Consultation Report on The Beneficiary Designation Act

The Manitoba Law Reform Commission has published a consultation paper on The Beneficiary Designation Act (Retirement, Savings and Other Plans):

"Pension plans, insurance proceeds, and other retirement savings vehicles play an important role in the savings strategies of Canadians. As individuals pay into these plans over the years, issues arise such as: what happens when the plan owner dies? Where does the money go?"

"In Manitoba, the treatment of the proceeds of these financial products upon the death of the owner is regulated by The Insurance Act, The Pension Benefits Act and The Beneficiary Designation Act (Retirement, Savings and Other Plans) (hereinafter “The Beneficiary Designation Act”). The latter provides for designation of beneficiaries to occur without the formalities required under The Wills Act."

"Recently, a gap in The Beneficiary Designation Act came to the attention of the Commission respecting beneficiary designations when plans are renewed, replaced or converted. In these situations, a new plan is created and the old plan ceases to exist. Plan beneficiary designations do not automatically roll over and a fresh beneficiary designation must be made or, upon the death of the owner of the plan, the proceeds are payable to the plan owner’s estate. A further look at the legislation and comparison with the legislation of other jurisdictions highlighted several other potential deficiencies in Manitoba’s legislative scheme."

"This Consultation Report considers possible amendments to improve the legislation and procedure related to beneficiary designations in Manitoba. Given the popularity of pension plans, registered savings plans, and other retirement savings vehicles in the marketplace today, it is important to ensure that the legislative scheme in place provides appropriate and adequate guidance to plan owners, designated beneficiaries and the legal profession. "

English Law Commission Report on Fiduciary Duties of Investment Intermediaries

The English Law Commission has released a report on Fiduciary Duties of Investment Intermediaries:

"In this report we have considered the question of long-term investment with particular reference to pensions, where liabilities will typically be incurred over a long period (...)"

"We conclude that trustees should take into account factors which are financially material to the performance of an investment. Where trustees think ethical or environmental, social or governance (ESG) issues are financially material they should take them into account."

"We also conclude that, whilst the pursuit of a financial return should be the predominant concern of pension trustees, the law is sufficiently flexible to allow other, subordinate, concerns to be taken into account. The law permits trustees to make investment decisions that are based on non-financial factors, provided that:

• they have good reason to think that scheme members share the concern, and
• there is no risk of significant financial detriment to the fund."

Alberta Law Reform Institute Report on Beneficiary Designation by Substitute Decision Makers

The Alberta Law Reform Institute has released a report on Beneficiary Designation by Substitute Decision Makers that deals with the issue of who gets to designate beneficiaries of pension plans and insurance policies when the owner has lost legal capacity, especially due to age.

It is legally unclear if a substitute decision maker has the legal authority to make, change or revoke beneficiary designations on behalf of the represented adult.

The report proposes changes to a number of provincial Acts:

"This report recommends legislative changes to ensure that testamentary wishes are respected. The most common situation is when an attorney or trustee needs to transfer a plan or policy from one institution or company to another, or to convert an RSP to an RIF when the owner attains age 71. The first recommendation would clarify the law by expressly allowing an attorney or a trustee to make an administrative change on behalf of the donor or represented adult by designating any beneficiary named under a plan or policy when renewing, replacing or converting that plan or policy."

"Another situation where the inability to update beneficiary designations may produce unexpected and unfair results is the beneficiary designation in favour of a former spouse or adult interdependent partner. There is a common misconception that such a designation is revoked at the end of a marriage or an adult interdependent partnership. But this is not the case. While a gift in a will to a spouse or adult interdependent partner is revoked as though the former spouse or adult interdependent partner had predeceased the testator, a beneficiary designation remains in effect unless the plan or policy owner takes some positive action to change that designation. If the owner has lost the capacity to designate a new beneficiary – and the attorney or trustee does not have the authority to make, change or revoke the designation – the former spouse or adult interdependent partner will continue to benefit. The same will happen if the plan or policy owner forgets to revoke the unwanted beneficiary designation. The second aspect of our recommendations would clarify the law by making it consistent with the approach taken with respect to gifts in a will."

Law Commission of Ontario Recommendations on Division of Pensions on Marital Breakdown

The Law Commission of Ontario (LCO) has released its recommendations in relation to the division of pensions on marital breakdown.

"Among the most important recommendations is that Ontario adopt as the primary settlement mechanism the Immediate Settlement Method (ISM). Where the spouse with the equalization obligation is a member of a pension plan and wishes to resort to his or her rights under the plan to satisfy the obligation, legislation would (if the recommendation were to be adopted) provide for a transfer out of the fund of the pension plan to the benefit of the other spouse (...) . However, in certain cases, the LCO believes that separating spouses should be able to opt for the Deferred Settlement Method (DSM). Under the DSM, the spouse to whom the equalization obligation was owed would become a quasi-member of the member spouse’s pension plan and would become entitled to receive his or her own pension from the plan when the member retired (or on the member’s normal retirement date where the member postpones retirement beyond that date). The LCO is recommending that this option generally be available only where the member is within ten years of his or her normal retirement date and both spouses agree to it; however, it would also be available where the member was more than ten years from the normal retirement date if both the spouses and the pension plan administrator agree."

The recommendations have been presented to the province's Attorney General for consideration of appropriate amendments to the Family Law Act.

The LCO had published a consultation paper on the issue in May 2008.

Pension Regulation Consultation

The Canadian Association of Pension Supervisory Authorities (CAPSA) has released a consultation paper titled Proposed funding principles for a model pension law.

There is also a 2-page Q&A document available.

The paper is part of an effort by CAPSA to identify the best practices in pension regulation in all Canadian jurisdictions, with the ultimate goal of harmonizing pension legislation.

Submissions will be received until November 30, 2005.