How Pensions Are Divided on Separation in Ontario

A workplace pension is often one of the largest assets a couple has, yet it is not a pile of cash you can simply split. If you have a pension, or your spouse does, you may wonder how it is counted and what sharing it looks like.

This article gives a general overview of the Ontario rules. Pension plans differ, and some follow other laws, so a lawyer can confirm how your plan is treated.

How the pension is valued

For family law purposes, the imputed value of a spouse's interest in a pension plan is determined under the Pension Benefits Act. For other pension plans, the same method is used where reasonably possible.

The value feeds into the spouse's net family property, because property is defined broadly to include any present or future, vested or contingent interest. The spouse with the lower net family property is then generally entitled to one-half of the difference. A court may award more or less than half only if equalizing would be unconscionable, and Ontario.ca describes this as limited to very special situations where an equal split would be extremely unfair to one spouse.

The valuation date is the earliest of five dates. They include the date of separation with no reasonable prospect of resuming cohabitation, the date a divorce is granted, and the day before a spouse dies. A spouse who claims a deduction or exclusion has the onus of proving it.

How a pension can be divided

An order may provide for an immediate lump-sum transfer out of a pension plan. If the pension is already in pay on the valuation date, the order may divide the pension payments. Other ways of dividing the plan interest are generally not permitted.

The court considers factors such as the liquidity of the lump sum in the hands of the receiving spouse.

A family law order, award or domestic contract is not effective to the extent it gives the other spouse more than 50 per cent of the imputed value of the pension, whether by lump-sum transfer or by dividing a pension in pay.

A court may also order one spouse to pay the other the equalization amount owed. To avoid hardship, it may allow payment in instalments or delayed payment for up to ten years. How a pension fits with the rest of your property depends on your situation, so it is worth confirming with a lawyer.

Common-law partners and other plans

Equalization under Part I of the Family Law Act applies only to a spouse as defined in section 1(1), which covers people married to each other and does not include unmarried cohabitants.

The Pension Benefits Act is broader. Its definition of spouse includes unmarried partners who have cohabited continuously in a conjugal relationship for at least three years, or in a relationship of some permanence if they are parents of a child. Where Part I of the Family Law Act does not apply, the valuation date for pension purposes is the date the spouses separated with no reasonable prospect of resuming cohabitation.

Outside pensions, Ontario.ca states that common-law couples are not legally required to split property acquired while living together, and that property belongs to whoever bought it. A partner who contributed to the other's property may have a claim to part of it, which may require going to court.

Federal and other non-Ontario pension plans follow their own statutes, such as the federal Pension Benefits Division Act, so the Ontario rules may not govern them.

Tax points on registered plans

• CRA Form T2220 is used to transfer all or part of an RRSP or RRIF directly to a current or former spouse's or common-law partner's RRSP or RRIF on breakdown of the relationship.
• The transfer must be direct, and the recipient must be entitled under a court order or a written agreement dividing property. For unmatured plans, the spouses must be living separate and apart at the time of transfer.
• If the RRSP holder instead withdraws the money and pays it to the spouse, the amount is taxable income to the holder in the year received.

Whether these tax points apply to your particular plan depends on the type of plan and your situation, so it is worth confirming with an accountant.

What to do next

• Ask the plan administrator for pension statements and details of the plan type.
• Collect the date of marriage, separation date and other key dates.
• Be ready to provide supporting documents and a sworn statement of property, since disclosure is required.
• Find out whether your plan is provincially or federally regulated.
• Get legal advice before signing an agreement that deals with the pension.

If a party has not served a required disclosure document, the court may order them to do so and must also order costs.

In court, a party making a property claim must serve and file a financial statement with the claim, using Form 13.1. Supporting documents, including account and investment statements closest to the valuation date, are due within 30 days after the financial statement is due. If you find that a served document is incorrect, you must promptly serve the corrected information.

Time limits apply. An equalization application must be brought by the earliest of two years after a divorce or nullity, six years after separation with no reasonable prospect of resuming cohabitation, or six months after the first spouse's death. The court may extend a time limit in limited circumstances.

Frequently asked questions