Workplace Pension Division on Separation in Ontario

For many couples, a workplace pension is one of the largest assets they own, yet it can be the hardest to understand. A defined benefit pension promises a future income and does not show up as a simple balance you can look up.

This article explains how Ontario treats a workplace pension when married spouses separate, the general process for getting it valued, and where the details depend on your plan and facts. A lawyer or pension valuator can help with the specifics.

A pension is property

Pensions count as property when calculating each spouse's share. Workplace pensions count as property valued in the equalization, whereas Canada Pension Plan credits are excluded and dealt with by credit splitting instead.

Equalization works like this: the spouse with the larger net family property pays half the difference as an equalization payment. More precisely, the spouse whose net family property is smaller is entitled to one-half the difference between the two. Debts such as credit cards, car loans and mortgages are subtracted.

This regime applies to spouses who are married to each other. Unmarried partners are not spouses for equalization, so a common-law partner's pension rights depend on other rules and on any agreement between you.

The Pension Benefits Act process

The Pension Benefits Act and Regulation 287/11 set the process for valuing and dividing a pension on marriage breakdown. This regime has been in effect since January 1, 2012.

The member or the spouse applies on Family Law Form 1 for a statement of the pension's value. The plan administrator then issues the statement on one of Forms 4A to 4E, depending on the type of pension.

The forms and the exact steps depend on your plan. Ask the plan administrator, or a lawyer, which form applies to you.

What shapes the outcome

Several things influence how a pension is valued and shared, and many of them cannot be answered without your plan documents and the current law. Questions a lawyer will typically explore include:

• What kind of plan it is, and whether the member is still working, has left, or is retired.
• The valuation date, which is generally the date you separated with no reasonable prospect of resuming cohabitation.
• Whether any of the pension was earned before the marriage. Net family property is calculated after subtracting the net value of property owned on the date of marriage.
• Whether the pension is being valued as property in the equalization or divided between the spouses in some other way. The options depend on the Pension Benefits Act and your plan, and are worth confirming with a lawyer.
• What the rest of the settlement looks like, since a pension is only one asset in the equalization.

A court can divide property unequally only where an equal split would be extremely unfair to one spouse. That is not the starting point.

Pension, CPP and the matrimonial home

People often mix up different retirement benefits. A workplace pension and CPP are treated differently: CPP unadjusted pensionable earnings are excluded from net family property, while workplace pensions are valued in the equalization.

If you want to share CPP credits, that is a separate application. Credits are divided on application after divorce or after you have lived separate and apart for one year or more. See our separate article on splitting CPP credits for details.

Be careful not to assume a settlement that deals with the home also deals with the pension. Each needs to be addressed in your agreement.

Deadlines and agreements

An application for equalization must be brought by the earliest of two years after the marriage is terminated by divorce or judgment of nullity, six years after the spouses separate with no reasonable prospect of resuming cohabitation, or six months after the first spouse's death. In everyday terms, you have six years from separation or two years from the divorce being final, whichever comes first, to go to court.

If you settle, a separation agreement can deal with property division. Both partners must sign in front of a witness, and the witness must also sign. You do not need a lawyer to make a separation agreement, but legal advice before signing is recommended, and each party should understand the terms, give complete and honest financial information and not be under pressure.

Property disputes and divorce are decided in the Superior Court of Justice, because the Ontario Court of Justice cannot decide property division.

What to do next

Pension questions usually take time because the administrator needs to produce a statement. Starting early helps you negotiate with real numbers.

• Confirm the date of marriage and the date of separation.
• Identify the plan name, administrator and type of pension.
• Collect recent pension statements and the plan booklet.
• Ask a lawyer whether to apply on Family Law Form 1 for a statement.
• Consider whether an independent valuation or financial adviser is needed.
• List your other assets and debts so the pension is seen in context.
• Legal advice before signing a separation agreement is recommended, so consider getting it before you sign anything that affects your pension.

Frequently asked questions