Disclaimer: This article aims to provide educational information surrounding separation and divorce. It is not intended to serve as legal advice. Consult with a lawyer and exercise your discretion before taking action based on the information provided in the blog.

There is much to untangle during a marriage breakdown, including understanding how your assets will be divided. Pensions, whether your CPP pension or one provided by an employer, are considered an asset under the Family Law Act.  

How do you determine the value of the pension, and how does it impact your net family property? Are different types of pensions treated differently? What does Ontario’s family law say on the matter? 

That is what we will consider in this article. 

However, pension legislation can be complex (which is why we included a glossary of terms at the end of this article). There are many factors to consider when it comes to how your pension impacts your divorce or separation. While this article provides a helpful outline, we cannot underestimate the importance of speaking to your legal and financial team about your specific needs. 

Note for Common-Law Relationships

The property equalization provisions of the Ontario Family Law Act do not apply to common-law couples. Therefore, you are not legally required to divide your pension with your former spouse for common-law relationships unless you agree to it.

How is your Canada Pension Plan divided following a divorce? 

The Canada Pension Plan (CPP) is automatically subject to equalization upon divorce. This means that the credits accumulated during the marriage are divided equally between both parties. The process of dividing your Canada pension assets is quite simple. You fill out a form that both parties sign and submit, ensuring that the CPP credits are equally divided. 

What if my separation agreement says I won’t equalize my CPP? 

You or your former spouse cannot legally opt out of equalizing your CPP pension benefit in Ontario. Any clause in a separation agreement attempting to bypass this equalization is not enforceable. 

Your separation date and the family law value of a pension

The family law value of the pension, also known as the “imputed value,” is calculated to reflect the amount accrued from the date of marriage to the date of separation. This value is then used in the equalization process to ensure assets are divded fairly.

The pension plan member and their spouses may disagree on the actual separation date. Learn more about how your separation date is calculated by reading this article. 

In that instance, you can submit a request for two family law values based on two dates. 

Determining the Value of Your Federal Pension 

You need to obtain an official valuation for pensions provided by federally regulated employers, such as those offered by an airline or bank. This valuation assesses the pension’s value from the date of marriage to the date of separation. 

The Pension Benefits Division Act governs federal public sector employees and allows them to divide the pension benefits that they accumulated under the public service pension plan if your marriage or common-law relationship breakdown.

Dividing Ontario Provincial Pensions

Provincial pensions, including those from OMERS, HOOPP, and the Ontario Teachers’ Pension Plan, follow a different procedure.

Previously, you had to hire an evaluator to determine the pensions’ actual value.

However, the Financial Services Regulatory Authority of Ontario (FSRA) has updated its procedure. The plan member and spouse now complete a standardized form and pay the required fee. The form, called the Statement of Family Law Value, is submitted to the pension administrator, who will then calculate and provide the pension’s value. 

You will use that figure when you divide the pension during the equalization process.

Determining how your or your spouse’s pension will be divided

There are two primary methods to equalize pensions:

Division at Source: The pension plan directly transfers a portion of the pension to the other party’s locked-in retirement account (LIRA). This method ensures that the receiving party cannot withdraw the funds until retirement, maintaining the integrity of the retirement savings. Defined benefit pension plans are typically divided at the source. 

Inclusion in Equalization Calculation: The pension’s value and other assets and debts are included in the overall equalization calculation. This can result in a cash payment to balance the division of assets. For example, if the pension is valued at $500,000, it might be part of a larger settlement involving the house, bank accounts, and other assets.

Plat Simionati LLP: Helping you navigate your pensions and divorce 

Dividing pensions during a divorce can be complex. Each type of pension has its own set of rules and procedures. Understanding these and seeking professional advice can ensure a fair and equitable division.

At Plat Simionati LLP, we specialize in helping you navigate the complexities of modern relationships, from negotiating cohabitation agreements to child and spousal support. Contact us for expert guidance and support to protect your financial future during this challenging time. Whether you need assistance calculating the lump sum value of your pension or require a court order to enforce the division, we are here to help.

Glossary of terms related to pension valuation and vision

Here’s a short glossary of terms related to pension division during separation or divorce in Ontario:

Equalization: The process of dividing assets acquired during marriage, such as pensions, to achieve an equal distribution between spouses.

Imputed Value: The assessed value of a pension or other asset at a specific time (e.g. the date of separation) used to calculate equalization.

Locked-in Retirement Account (LIRA): A retirement account where pension funds can be transferred without tax consequences until retirement.

Family Law Value: The value of an asset, like a pension, calculated according to family law rules for equalization purposes.

Defined Benefit Pension Plan: A pension plan that guarantees a specific monthly benefit at retirement based on salary and years of service.