Pension plans and divorce: How are the credits split?

Along with divorce comes the division of assets.  One often misunderstood component involves the sharing of accumulated pension credits.  Here's what you need to know…

Based on when you were divorced, you are eligible to a share of each other's pension credits, unless your separation agreement stated otherwise (since BC, for example, is one of the provinces that allow spouses to opt out of this arrangement as long as both agree).

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It works this way: each year that you contribute to CPP (Canada Pension Plan), you accumulate credits. These credits are used to calculate your CPP payment at age 65. If you start your pension at age 60, the monthly payment is reduced. For the years in which you were spouses (married or common-law) only, he can have 50% of your credits and you get 50% of his. If you were earning the same amount in those years, then each of your credits would have been the same and there would be no change. If he was not working and you were, then your credits would drop and his would increase for those years and vice versa.

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Either one of you can request to have these credits split by providing a certified true copy of your divorce decree and basic information to Human Resources and Skills Development Canada without seeking the approval of your former spouse. An adjustment will be made to each of your credits for the years in question, which you can see on your CPP Benefits Statement. You both independently apply to take CPP, so it doesn't matter when either of you choose to take it.

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If you were the lower income earner in your marriage, be sure to provide the documentation to split the benefits. If you were the higher income earner, request a CPP Benefit Statement to see if a request has been made by your former spouse to split your benefits (if you're unsure what the exact agreement was, potentially many years ago).

For more information surrounding the financial ramifications of divorce, click here.

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Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.

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