When going through separation and divorce you need to consider your future financial circumstances, including retirement, no matter how old you are or what stage of life you are at. Pensions and retirement savings are something to consider very carefully, even if retirement seems a long way off. Whether you are the holder of a pension or the spouse of a pension holder, you need to know what your rights and entitlements are and whether pensions will need to be divided in your case. Below, we discuss different types of pensions and registered investments and the issues that require sound legal advice.
Different Types of Pensions
An interest in a pension plan is considered property that needs to be valued and included in your net family property.
There are different kinds of pensions. The type of pension you have will determine how it must be valued and how it can be split.
- Defined benefit pensions must be valued by an actuary. The valuation will determine the “family law value” of your defined benefit pension (simply put, the portion of your pension earned from the date of marriage to the date of separation). The applicable pension legislation will determine whether your particular pension can be divided at the source.
- Defined contribution pensions are typically in the form of a registered savings or investment account and do not need to be valued. The balance of the account(s) on the relevant dates will be used.
- RRSPs do not need to be valued, but the balance of the account on the relevant dates will be used.
- Entitlement to the Canada Pension Plan (“CPP”) depends on credits earned during your working years. The division of CPP credits is governed by CPP legislation. There are limitation periods that limit the time you have to make an application to divide CPP credits.
What About My RRSP, LIRA or other registered savings accounts?
Registered savings accounts such as RRSPs, LIRAs and other types of savings plans are assets that must be included in your net family property unless an exclusion or deduction applies. Because of the differing tax treatment of registered accounts, there are tax rules and consequences that you need to be aware of, such as spousal rollovers and gross-up calculations.
Changing your beneficiary designation
The rules that apply to changing your beneficiary designation under your pension depend on the circumstances of your matter, including they type of pension you have and whether your pension is currently in pay. Changing your beneficiary designation is something that you will want to consider in your separation.
For more information about the rules that apply to a pension in your circumstances, contact the family lawyers at Tenk Tatum LLP.