What Does the Future Hold? Pensions and the rotational spouse
Par : Hala El-Saadany
Greetings All!
Welcome to our new Bulletin, I hope you enjoy it as much as I enjoyed putting it together for you. I write to you today as both the Editor of the Bulletin and the First Vice President of the FSCA. I accepted the position of First Vice President after Susan Desbiens announced that she could not carry out the remainder of her term for personal reasons. Susan will be missed by the Executive Committee, although everyone is very happy that she remains in contact and involved with the FSCA.
As a rookie VP, I was pretty excited with my new job, and very interested in the files I will be taking over. Generally the First VP is tasked with ensuring that all the committees have what they need to perform their jobs and that all projects are on track. Besides that, I’ve been handed the file on spousal pensions, an issue that concerns all of us. Read on to learn more about this issue and what you can do to give our concerns a strong voice:
Rotational spouses face unique challenges, moving every three years, uprooting themselves and their families, only to try to resettle somewhere else. These challenges affect all aspects of spousal life, in particular employment and income generation. A rotational spouse is not likely to find employment easily because of the temporary nature of his/her presence in any country, and the result of that is obviously that they are unable to generate a steady income to help with family expenses.
These employment difficulties can have several results: spouses might take contract work whenever they can find it, earning an income but not building a work history or contributing to their pensions, spouses might give up on working altogether, creating a strained financial situation as the whole family is supported by one wage earner, or the spouse might decide to separate him/herself from the rotational employee for the duration of the posting, remaining in Canada to keep their jobs. This last option causes the most strain to the family unit, and is not yet a common one.
What concerns us here is what happens at the end of the rotational career, what do rotational spouses do after retirement? Not having had the opportunity to contribute to a pension, the rotational spouse is at a distinct disadvantage when it comes to those golden years.
In 1999 a Spousal Task Force was formed, with members from the Department of Foreign Affairs and International Trade, the Foreign Service Community Association, Citizenship and Immigration Canada, and the Canadian International Development Agency. This Task Force investigated the employment concerns faced by rotational employees and presented a report to the concerned public service departments. They summarized the concerns as follows:
- Lack of employment opportunities abroad,
- Lack of pension benefits accrued during periods spent on posting,
- Lack of access to EI benefits,
- Lack of financial support for continuing education internationally,
- Impossibility of maintaining a continuous career path,
- Repeatedly starting at entry-level positions after a protracted job search process.
Some spouses are employed by the public service and can apply for leave without pay for the duration of the posting. However, even those lucky spouses face a tough time when they return to their jobs. They have to choose between not buying back their pension time that elapsed while they were away on posting, or buying it back, with all the disadvantages that entails. The disadvantages are financial, because the time buy-back lowers the family’s income considerably. The employee and the employer have to pay into the buy-back over the same period of time as the leave taken. During this same time, the employee (spouse) is paying the contribution applicable while s/he is working, meaning that three shares are being paid, making quite a dent in the family’s income. Often the buy-back is completed only in time for the spouse to leave again on posting!
This report is concerned only with the pensions of rotational spouses, and to that end, I’d like to list the recommendations offered by the Spousal Task Force five years ago.
- Provide full pension contributions to spouses/partners of employees of the federal government who accompany them on overseas postings (annual cost for DFAIT and CIC spouses/partners: $4,860,000.), Conditions:
- To retain present staff, provide spousal pension benefits retroactive to 1992. (one time cost: 8 years x $4,860,000 = $38,880,000). To initiate the payment of pension benefits for spouses starting in the year 1999 or 2000 without similar benefits for spouses who have already put in years of uncompensated overseas service will produce a high level of resentment among long-term employees and their families. The effect will be an increased loss of valued staff members. The date of initiation is based on the second pension submission of the Foreign Service Community Association, 1992. Cost: a one-time payment of $38,880,000 (8 years x $4.860,000)
Of course, the numbers from the 1999 report are no longer accurate, but they can be used as an indicator of how affordable such a plan may or may not be. The report also summarized the steps taken by other Foreign Service departments to contribute to spousal pensions, in order to provide basis for comparison. Their findings were as follows:
| Annual Contribution | Method of Contribution | Taxed | Comments | |
| Austria | $3,600 pa | Through employee | No |
The result of a study that highlighted inequalities. Initiated in 1999. Fifteen years of contributions are necessary to vest the pension |
| Finland | National pension | In spouse’s name | No |
Equivalent of CPP, indexed |
| Germany | 5% of employee’s foreign service allowance | Through employee | No |
Dependent on rank of employee |
| Norway | Pension | Through employee | No |
Full pension available after 30 years overseas; initiated after 10 years overseas. Payable at age 67. |
| Sweden | $3,600 pa | Through employee | No |
In recognition of the rising number of female employees, the pension was initiated to acknowledge that it is culturally more difficult for male spouses to leave employment |
| Switzerland | $6,400 pa | Through employee | No |
Meant to be directed to private pension scheme |
| United Kingdom | $4,200 pa | Through employee | No |
Financial compensation |
| United States | Pension earned by employed spouse: paid 50% USG, 50% spouse | Directly | No |
More than 80% of Foreign Service spouses are employed in US missions; employment transportable |
| CANADA | NONE | NONE | Small missions and contracts at LES rate of pay reduce rate of GOC employment in missions |
Austria: In October 1997 it was agreed in principle by the Austrian foreign ministry and the finance ministry that the foreign ministry should facilitate government contribution to a spousal pension scheme for Foreign Service spouses. Fifteen years of Austrian government pension contributions must be made in order for a pension to be paid out.
Finland: A special compensation/pension law for Foreign Service spouses was passed in 1989 and revised in 1991. If the spouse is employed for pay at posting, this law does not apply. Any other pension is not affected. The pension is taxable at a rate of 22.5% on payment. The pension is indexed.
Example: The spouse has accompanied the employee abroad for a total of 15 years = 180 months x 121.57FMK = 21882.6 = 1823.55 per month.
Germany: 5% of the tax free foreign service allowance is payable through the employee to the spouse to apply to a personal private pension.
Norway: At the end of 1998 the Norwegian parliament passed a Pension Act for Foreign Service spouses. The full pension is predicated on thirty years’ service overseas. It is not initiated until ten years have been spent overseas; the Norwegian government pays all premiums. The pension is paid out starting at age sixty-seven, the age of retirement in Norway. Limited employment possibilities overseas for all spouses, and the difficulty male spouses face in leaving their jobs at home, thus making female diplomats more reluctant to accept postings, are defined as the reason for the initiation of the pension scheme at this time.
Sweden: Swedish Foreign Service spouses/partners are paid the equivalent of Cdn $300 per month contribution to their pension plan while on posting. One of the reasons the pension was initiated was to acknowledge the fact that male spouses are culturally conditioned to be reluctant to leave their employment to accompany the employee on a posting. Heterosexual and same sex partners are included in the pension scheme.
Switzerland: As a contribution to a private spousal pension, the Swiss foreign ministry pays the employee the equivalent of Cdn $6,400 per annum, tax free, if s/he is accompanied by his/her spouse on posting. The Swiss spousal association has arranged with a private Swiss insurance company based in The Bahamas for a spousal group pension scheme. The spousal association is the contract partner with the insurance company. Although the contribution is meant to be devoted to a spousal pension, since there is no method to force this application, all spouses do not do so. The spouse decides on the amount s/he will contribute to the pension scheme annually, which is paid out at retirement age anywhere in the world. One third of Swiss Foreign Service spouses are contributors to the pension plan, and their numbers are growing.
This arrangement was initiated by the spousal association when it became clear that, after divorce, if the employee remarries and remains married to that spouse for more than ten years, all his/her pension benefits, including survivor benefits will devolve to the second spouse. The length of the first marriage is immaterial.
The United Kingdom: As a result of the 1998 report of British Foreign Service spouses, entitled Role, Recognition and Recompense, in 1999 the United Kingdom is initiating a tax-free compensation package for accompanying spouses who are committed to a rotational life attached to the British Foreign Service. That commitment is demonstrated by the spouse having spent three years at any post without compensation. From then on a payment of one hundred twenty five pounds (approximately Cdn$325.00) per month abroad is paid to the souse through the employee. The spouse must have registered as willing to work at the post and be unable to find employment that pays more than five hundred pounds per month. If the spouse is employed while s/he resides at the post and earns more than five hundred pounds per calendar month, the compensation paid is halved.
The reason the British government has come to this decision is that spouses who accompany the employee on a regular basis are treated unfairly in relation to the finances of those who stay at home. The compensation is intended as an acknowledgement of the spouses’ commitment for an international life in support of the British government.
Spouses may be remunerated for preparation of representational catering at a rate that differs from post to post; in Ottawa it is Cdn$ 18.00 per hour.
The United States of America: In May of 1998 the Department of State and United States Information Service initiated a system of hiring spouses at missions abroad under a five-year direct hire non-career system that allows the spouse to carry that position for five years. This Family Member Appointment (FMA) makes her/him eligible for employment from one post to another or to headquarters in Washington, DC. In turn, the FMA employee is eligible for the federal retirement plan and to enroll in federal health and life insurance programs.
The FMA system was approved on the basis of equal pay for work of equal value after years of lobbying on behalf of US Foreign Service dependents. The US State Department is responsible for its own budget.
What can we do now?
The report cited above was presented five years ago, and to date, nothing has been done regarding spousal pensions. Members of the Foreign Service Community Association have to make their voices heard in order to encourage some action. To achieve that aim, please write to the person in charge of the ministry or agency you and your spouse are affiliated with:
Foreign Affairs Canada:
International Trade Canada:
Citizenship and Immigration Canada:
Canadian International Development Agency:
In your email, outline your concerns regarding your future and how the lack of a pension for rotational spouses negatively impacts the entire family after retirement. You may refer to the Spousal Task Force report that has been presented to these agencies in September 1999. Please make your voices heard!