- Pensions and RRSPs are counted as property when Ontario calculates equalization.
- The value of a Pension Benefits Act plan interest is set under that Act, and a lump-sum transfer is limited to 50 per cent of the imputed value.
- The date of separation matters because it can fix the valuation date for property.
For many people, a workplace pension is one of the largest assets in a marriage, yet it is the hardest to picture dividing. You cannot simply split a cheque, because the money may not be paid out for years.
This page explains how Ontario treats pensions on separation or divorce, how the Pension Benefits Act affects a transfer, and how CPP credits and RRSPs fit in.
Pensions count as property
On separation or divorce, the spouse whose net family property is smaller is entitled to one-half of the difference between the two spouses' net family properties. Net family property is the value of property a spouse owns on the valuation date, minus debts and permitted deductions, and is never less than zero. RRSPs and pensions are counted as property.
Some property is excluded, such as gifts or inheritances from a third party received after the marriage (other than a matrimonial home), personal injury damages, life insurance proceeds and property excluded by a domestic contract. The person claiming an exclusion must prove it. The court may award more or less than half the difference if equalizing would be unconscionable.
How the pension is valued
For a plan under the Pension Benefits Act, the imputed value of a spouse's interest for family law purposes is set under that Act. Once that value is set, a court order dealing with the pension may provide for an immediate lump-sum transfer out of the pension plan.
The valuation date is the earliest of several dates. One is the date the spouses separate with no reasonable prospect of resuming cohabitation. This is why the date of separation matters for property, and it is worth recording carefully.
For common-law spouses who are not covered by Part I of the Family Law Act, the pension valuation date is the date they separate. Only the member, former member or retired member, not the other spouse, may apply for the statement of imputed value.
Dividing the pension: the lump-sum transfer
An order may provide for an immediate lump-sum transfer out of the pension plan. Under the Pension Benefits Act, a spouse may apply for that transfer only if it is provided for by a court order under Part I of the Family Law Act, a family arbitration award or a domestic contract. The amount must be stated as a fixed sum or as a proportion of the imputed value.
There is a ceiling. An order, award or contract has no effect to the extent it gives the eligible spouse a lump sum of more than 50 per cent of the imputed value of the pension.
Many couples instead keep the pension with its owner and offset its value against other property. Which approach suits you depends on the facts, so it is worth getting legal and financial advice.
Related retirement assets
| Asset | What to know |
|---|---|
| Canada Pension Plan | Contributions made while you lived together can be split equally after divorce or separation. |
| RRSP | Funds can move tax-free to a spouse's RRSP or RRIF under a court order or written separation agreement. |
| Pension Benefits Act plan | Lump-sum transfer is capped at 50 per cent of imputed value. |
For CPP credit splitting after divorce or annulment on or after January 1, 1987, the spouses must have lived together for at least 12 consecutive months, and there is no time limit to apply. For common-law partners, the application must be made within 48 months of separating, unless the former partner agrees in writing to waive the limit.
An RRSP transfer without immediate tax requires that the spouses are living separate and apart and that the transfer is made under a court order or written separation agreement dividing property on the breakdown of the relationship. The CRA reports it on Form T2220.
What to do next
- Write down your separation date and gather pension statements for both spouses.
- Ask the plan administrator what information is available, keeping in mind that common-law spouses may not be able to request the statement themselves.
- If you sign a separation agreement, it must be in writing, signed by the parties and witnessed to be enforceable.
- Watch time limits. An equalization claim can be barred at the earliest of two years after a divorce judgment, six years after separation, or six months after the first spouse's death, though the court may extend time in some cases.
A court may set aside a domestic contract if a party failed to disclose significant assets or debts. Full disclosure of pension information protects both of you, and a lawyer can help you review the numbers.
Frequently asked questions
Does my spouse automatically get half my pension?
Not automatically. Pensions are counted as property in the equalization calculation, which gives the spouse with the smaller net family property one-half of the difference. A lump-sum transfer from the plan cannot exceed 50 per cent of the imputed value.
Who decides what the pension is worth?
For a Pension Benefits Act plan, the imputed value for family law purposes is set under that Act. A professional or the plan administrator can explain how it applies to your plan.
Can common-law partners divide a pension the same way?
Different rules apply to spouses not covered by Part I of the Family Law Act. The pension valuation date is the date they separate, and only the member can apply for the statement of imputed value.
Can CPP be split after divorce?
Yes. CPP contributions made while you lived together can be split equally. For divorces on or after January 1, 1987, you must have lived together at least 12 consecutive months, with no time limit to apply.
Sources
- Family Law Act, ss. 4-5 — Ontario e-Laws
- Pension Benefits Act, R.S.O. 1990, c. P.8, s. 67.3 — Ontario e-Laws
- Canada.ca – Divorced or separated: Splitting Canada Pension Plan credits — canada.ca
- Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 146(16)(b) — Justice Laws (federal)
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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