For richer or poorer: Sharing CPP with a spouse at divorce means never getting it back
B.C. man ends up with $338 a month after tax, after contributing for over 40 years
John Aitken was married for 30 years. When the marriage ended he and his ex-wife Sheena agreed to split the Canada Pension Plan credits accumulated during their time together 50-50.
The CPP is meant to be fair so that spouses end up with similar pensions though, as in many historical cases, John worked more years and contributed more money to the government pension than Sheena.
But Sheena got ill and died last year before John claimed his CPP when he turned 60 in December.
CPP is reduced for people who take it early. "If you take it before age 65, your pension will be reduced, by up to 36 per cent at age 60," the federal government says.
Aitken says he was shocked to see that he got only $338.50 a month after taxes, when he had contributed for over 40 years.
"They're taking my piece of the pie that I was supposed to give her, and they are still keeping all of hers," he says.
Pensions are always a gamble. You don't know how long it's going to last.— Fred Vettese of Morneau Shepell
Aitken believes he didn't get his share of Sheena's pension because she is dead and he only got half of his own because he had signed away half to her, an irrevocable decision that he finds unfair.
"I can understand because she's passed away then that's null and void, then the contract I had should be null and void also, which means I should have my full pension back," he said.
The money ended up back in CPP coffers. Unfair maybe, but inevitable, say experts.
"He assigned a pension payable for life and when the life expires, the pension is gone — there isn't anything to give back at that point in time," says Fred Vettese, chief actuary and partner at Morneau Shepell, the largest human resources firm in Canada.
"Pensions are always a gamble. You don't know how long it's going to last," he said.
"When they do the calculation, they will take into account that some people will only survive a year, some two years, four years and so on. There is a probability attached to each of those. They add up all of those probabilities in order to get the overall value."
Over six million Canadians receive a retirement pension or survivor pension from CPP, about 18 per cent of the population, according to government numbers.
Aitken "should have been told, 'You are giving up this pension for good. It's no longer yours. It's hers from this point on. And she may live 40 years or four years but it doesn't matter to you. She's getting part of your pension,'" said Vettese.
Restoring full pension would create a deficit
Restoring Aitken's full pension wouldn't be a viable option for the CPP, he says.
"This would create a deficit, because suddenly that pension is worth more than what the actuary assumes already. If it creates a deficit, it means you have to make up for it some other way. And the way they make up for it is that the overall costs go up, so you may have to increase contribution rates."
Employment and Social Development Canada (ESDC), the federal department responsible for the CPP, says it was designed to operate under the principle of pooled risk.
"Pooling risks allows the plan to offer coverage in a way more affordable for contributors, while recognizing that not all participants will benefit equally from the plan," it said in a statement provided to CBC News.
The department could not say how many people would be in Aitken's situation.
Vettese estimates 10 per cent of all CPP recipients could be affected.
ESDC said the CPP is no different from any other marital asset that is split upon divorce or separation.
"The CPP is under joint federal-provincial stewardship … change would require the support of not only the government of Canada but also of at least seven provinces representing two-thirds of the population."
Different provinces, different rules
Marriage and divorce are provincial responsibilities, and credit splitting is mandatory in all provinces except B.C., Alberta, Saskatchewan and Quebec.
The Aitkens weren't required by law to split their credits since they lived in B.C., but "what is done cannot be undone," said ESDC spokesperson Josh Bueckert.
There has been one recent challenge in a case very similar to Aitken's. A man appealed to the Social Security Tribunal of Canada to get back his deceased ex-wife's credits.
But it ruled against him, saying "It is permanent … there is no provision in the CPP to cancel or overturn credit-splitting credits in situations … when one of the former spouses dies."