Divorce and Division of Pensions

When faced with divorce it means more than just deciding who keeps the house or the car, in fact it also means dividing up your pensions. When a marriage breaks down and the divorce process initiated, family property must be split between the separating spouses and this goes beyond the general family home and joint bank accounts. This article will discuss the division of pensions in a divorce including both government and private pensions.
 
The value of pensions accumulated during the marital relationship is often a significant portion of the family’s assets and as such it is necessary for it to be divided between the divorcing spouses. Government pensions including Canada Pension Plan and some private pensions, are regulated federally, while others are regulated by provincial statute. Because of the different statutes governing different pensions there are important differences that you need to be aware of in respect of dividing marital pensions. Therefore, if you and your spouse are planning to separate or divorce it is important to get legal advice, in order for any agreement or court order that is dealing with pension splitting to show both the laws where your pensions were built up and the specific needs of your family.
 
The Canada Pension Plan requires divorcing spouses to apply for their Canada Pension Plan contributions to be split, this is referred to as credit splitting. Credit splitting basically means ‘that the amount of Canada Pension Plan contributions or credits that you both have accumulated during the marriage will be added together and split between the two parties’. It is important to note that the accumulated credits can be divided even if only one of the spouses made the Canada Pension Plan contributions.
 
Where spouses had a variation in earnings during their marriage, such a variation determines how much was to be paid into the plan, this could mean that one spouse’s pension will be higher at retirement while the other spouse’s pension will be lower. It is important to note that one spouse does not require the permission of the other in order to apply for a credit split because eventually the division may be appealed.
 
In respect of dividing private pension plans from funds accumulated during the marriage as a result of employer-sponsored pension plans, these are also family property. When the pension is split the non-member spouse may decide to transfer the value of the lump sum from a defined contribution to a personal registered retirement savings plan or they may choose to leave the money in the spouse’s plan and receive a pension at retirement. Some pension plans are locked in, which basically means that by law you cannot take out the cash value of the pension. In such cases the pension funds must be transferred into a locked in registered retirement savings plans. These pension funds will only be accessed when the person receiving the money retires.
 
Whichever the type of pension you and or your spouse has it is important that you consult an Ontario divorce lawyer in order to fully understand you entitlements and transfer options.
 
For a quick divorce in Toronto the author recommends the DivorceGo. 

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