The process of separation and divorce requires that decisions be made about who receives which assets and debts. Spouses can decide for themselves or ask a judge to decide, but in either case, all property and debt issues should be addressed in a legal instrument such as a Separation Agreement or a Court Order.
Pensions are one of the more complicated issues when it comes to property division. Let’s have a look at how separation or divorce can impact your employment pension in British Columbia.
Division of property 101
In BC, the Family Law Act (“FLA”) governs how property is divided when spouses separate. The initial rule is that spouses leave the relationship on a relatively equal footing when it comes to property
division. The rules about the division of property apply to both married couples and unmarried couples who have been living together in a marriage-like relationship for at least two years.
The Family Law Act states that “family property” is everything you or your spouse owned separately or
together on the date you separate. “Family debt” is all financial obligations incurred by you or your
spouse during your relationship. When you separate, all family property and all family debt are divided
50/50, unless you have an agreement that says otherwise or a judge orders an unequal division.
Is your pension family property?
Yes. Section 84 of the Family Law Act is clear that a spouse's entitlement under an annuity, a pension
plan, a retirement savings plan, or an income plan is family property. That includes RRSPs, LIRAs, RRIFs, Canada Pension Plan (“CPP”) credits, and pension benefits earned through your employment.
Pension benefits earned over the course of your relationship constitutes family property. The general
rule is that your spouse is entitled to half of the value of the pension benefits you accumulated during
your marriage or cohabitation—unless you agreed to something different or the court orders otherwise.
Any portion of your pension earned before the relationship began or after the date of separation is not family property and is not subject to division on separation or divorce.
Do you actually have to split your pension when you separate?
Not necessarily. The most common option is to divide your pension at source. You will need to submit an application to your pension plan administrator that includes information such as the date of marriage/cohabitation and the date of separation. They will calculate the value of your pension and your former spouse’s share of the pension benefits and then pay their share directly to them once they have received an application to divide the pension and once they have received an agreement or court order detailing the terms of
pension division.
The second option is for you to keep the entirety of your pension and to pay your spouse their share of your pension from other assets. If you choose the second option, you keep your entire pension in
exchange for another asset or cash equal to half the worth of your pension benefits. However, you need to know the value of your pension to be in a position to negotiate this type of settlement with your spouse and you would jointly need to hire an actuary to provide values depending on an expected retirement age and applying a discount value for the fact you are paying your spouse most often in cash up-front before you may even be eligible to receive your pension.
How do you know what your pension is worth?
It depends on the type of pension. With RRSPs and other registered retirement savings plans, you may
be able to use account statements, but will likely need to factor in tax implications and other considerations. With employee pension plans, however, your yearly pension benefit statement will not
be sufficient for family law purposes because it does not show the full value of your pension. You will
need to hire an actuary to calculate the monetary value of your pension before negotiating a settlement with your spouse.
Part 6 of the FLA contains detailed rules for valuing and dividing a pension after a marriage breakdown.
Depending on the type of pension you have, other laws may apply. For example, the Pension Benefits
Standards Act (“PBSA”) and the Pension Benefits Standards Regulation apply to all BC employment
pension plans. If you work in a federally regulated industry (e.g., Canada Post, RCMP, Canadian Armed
Forces, bank, airline), Canada’s Pension Benefits Division Act (“PBDA”) and its Regulations will apply to
valuation and division of your pension.
What other factors need to be considered when it comes to pensions and divorce?
Division of pension benefits can be very complicated. There are different rules and considerations when it comes to dividing a pension, depending on several factors:
One major factor is the type of pension: a defined benefit plan or a defined contribution plan. If
you are not sure which type of pension you have, your pension plan administrator can provide general information, but the plan administrator is not allowed to give you legal advice on how separation or divorce affects your pension. You will need to consult with an experienced separation lawyer for legal advice.
Another major factor is whether your pension has matured. If you have started receiving monthly payments from your pension, your spouse is entitled to a share of those payments. Because the pension payments are income, it can also have a significant impact on any spousal support and child support obligations.
Beyond those factors, you will also need to consider factors such as your age, how close you are to
retirement (or whether you are already retired), and tax consequences of how your pension is divided.
For example, your employment pension may be transferred into a registered pension plan owned by your spouse versus being paid directly to your spouse.
Reach out to an experienced divorce lawyer to protect your pension
If you are going through a separation or divorce and you are concerned about protecting your pension, give our divorce lawyer a call to discuss your rights and options. Dealing with the various legal aspects of a divorce or separation can be stressful. Fortunately, the team at Valerie M. Little Law Corporation can make the process easier by providing valuable information legal advice and support to assist you.
Valerie’s family law firm has helped countless clients with property division and related legal issues
following the termination of their relationship. Valerie M. Little Law Corporation is centrally located in New Westminster and serves all of Burnaby, Port Moody, Maple Ridge, Coquitlam, Port Coquitlam, Vancouver, North Vancouver, West Vancouver, Squamish, Whistler, Richmond, Surrey, Cloverdale, Delta and Langley. To schedule your confidential appointment, call Valerie at 604-526-3333 or email her today.