Pensions

The ownership of pensions by married spouses, at separation, requires special consideration. A pension is a future (or ongoing, if it is currently being paid) stream of income, which has a lump sum present value that constitutes “property” for family law purposes. Its value must be included in the spouse’s net family property figure.

There are two main types of pensions: defined benefit pensions and defined contribution pensions.

Defined contribution pensions. The value of defined contribution pensions is easily calculated: total contributions plus accrued interest.

Defined benefit pensions, on the other hand, must be professionally valued for Family Law purposes. Pursuant to changes in provincial pension legislation (as of January 1st 2012), Ontario pensions must now be valued by the pension plan administrator. Specific forms must be completed, signed by both spouses, and forwarded to the plan administrator with a fee, usually about $600.00 (which must be paid by the pension-owning spouse). It usually takes about two to four months to complete these valuations. A “family law value” will be provided.

Other private pensions. Federal pensions (such as CP and military) and other (eg. foreign) defined benefit pensions require special consideration.

Forms part of NFP. The family law value of a pension will form part of a spouse’s net family property figure. An amount for the notional income taxes on the pension should also be deducted (as a debt) in the calculation of the net family property figure.

Under recent changes to provincial pension legislation, should insufficient funds be available to make a monetary payment to equalize the spouses’ net family property figures, an interest in a payor spouse’s pension may be transferred to the other spouse, so that, at retirement, the recipient spouse receives a monthly pension payment.

CPP Pensions. The scheme of the Canada Pension Plan requires an equal division of the CPP credits accrued during the relationship (married or common law), on application of the parties. Parties cannot contract out of these provisions. The division will affect the amount of periodic monthly CPP payments that will be made at the date of entitlement.

OAS. Old age security is not considered “property” for Family Law purposes.

 

Photo: Vasile Hurghis: Flickr Creative Commons License. Cropped; changed to black and white.