When it comes to property division after separation, you may be wondering what happens to your work pension when you split up with your spouse or common-law partner. The answer is that it depends on the legislation that covers the specific plan.
Work pensions are different from government pension plans, such as Old Age Security and the Canada Pension Plan. Private work pensions are a type of retirement savings vehicle that some companies set up for their employees. Plan members accrue pension benefits during the time of their employment, often through their own contributions combined with their employer’s contributions.
Different Legislation Governs Private Pensions
In Manitoba, The Pensions Benefits Act governs provincial pension plans, such as the Healthcare Employees’ Pension Plans, or The Civil Service Superannuation Board plan. Under this legislation, there are two options for dealing with pension benefit credits that have accumulated during marriage or cohabitation. The first option is to divide the benefits equally, transferring them into a locked-in retirement account (LIRA) or life income fund (LIF). The second option is to waive the pension division. Where a fund administers the pensions of both partners, it will offset the two, paying out the difference to the person with the smaller pension.
Federal pensions, such as those benefitting employees of Canada Post or Air Canada, fall under the Pension Benefits Standards Act. Here, there is more flexibility when it comes to splitting the benefits upon separation. Along with the options to either divide the pension equally or waive a division of the pension, a third option is available that allows for a division of the pension other than an equal split. A federal pension can be divided up to a maximum of 50% to the ex-spouse or common-law partner and in any proportion below that. For example, a federal pension can be divided 60/40 or 25/75, provided that the ex-spouse or common-law partner receives no more than half.
Conditions of Waiving a Pension Split
Both parties must agree to a waiver. If the spouses or common-law partners are unable to agree on how to deal with the pension, the default is that the pension is divided equally (the process of which will be discussed in a future blog post).
If you do agree to the waiver, you must meet two additional conditions.
First, both parties must have seen a statement showing the value of the pension credits accumulated during the relationship and the value of the non-member spouse’s entitlement. This statement is called a commuted value statement. You can obtain this statement at no cost from the provincial pension administrator and some federal pension administrators. Some federal pensions require you to hire an actuary to calculate the commuted value of the pension.
The second criterion for a waiver to be valid is that both parties must have independent legal advice about the options relating to pension division or waiver.
The decision to divide or waive a pension can be a big one. Make sure to speak to a lawyer about your options and consider obtaining assistance from a financial planner who can help you plan for the future.
By Kelly Riediger
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