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How Pensions are Divided Following a Divorce

How Pensions are Divided Following a Divorce

Unfortunately, when a marriage breaks down, there are also legal issues to contend with. Property accrued throughout the marriage is divided between the separating spouses – assets, property etc. A question that often comes up is what happens with pensions following a divorce? After all, the value of a pension accumulated during the marriage can represent a significant percentage of each spouse’s assets.

Dividing Pensions in BC After Divorce

The division of pensions following a divorce in British Columbia is handled by the BC Family Law Act. Under the act, benefits in a pension plan are considered family property. This means both spouses are entitled to a share of the pension benefits built up while married. While the law seems clear, it does come with caveats. Dividing pension benefits can be complicated and it’s best to speak to a family law expert to explain the unique circumstances involved. How the pension benefits are divided between the two spouses is typically based on several time related factors. These include:

  • How long both spouses had been living together
  • When they got married
  • When they separated

Like other property brought into a marriage, if one spouse had accrued pension benefits before living together, those benefits typically aren’t involved or split up.

Sometimes, both parties will decide to forego these rights and split the benefits evenly. Typically, this happens if both are retired or close to retirement age. This agreement can be codified by a written agreement but again, it’s worth speaking to a family law expert before making any decisions along these lines.

Splitting Canada Pension Plan Credits

One of the most common scenarios we deal with is the splitting of Canada Pension Plan credits. The CPP contributions made by two spouses during their time together can be equally divided after a divorce. The term for this action is credit splitting. Credits can even be divided if one spouse (or common-law partner) didn’t make any contributions to the CPP. There are eligibility requirements to submit a credit split. These are as follows:

  • The total pensionable earnings of the spouses, former spouses or former common-law partners, in a year, was not more than twice the year’s basic exemption
  • A swap is not permitted for the period before one of the spouses reached 18, or after they reach the age of 70
  • A swap is not permitted when one of the spouses was a beneficiary of a retirement pension under the CPP or Quebec Pension Plan; and
  • The period when one of the spouses was considered to be disabled for the purpose of the CPP or QPP disability benefit.

Here to Help

Need advice with any aspect of the divorce process? At Westside, we’ve helped countless clients navigate this difficult time. Contact us and we’ll be happy to assist.