Separation, Divorce, Breakup... and Public and Private Pension Plans
A change in marital status can have an impact on both spouses' retirement incomes, especially if the couple's property is partitioned.
One spouse may have to work longer to save enough for retirement, while the other may see his or her savings actually rise. It all depends on the difference in the value of each spouse's partitionable assets.
Before deciding for or against partition, make sure you understand how each option would affect you.
Property is only partitioned after a relationship is dissolved. For marriages and civil unions, the breakup is usually finalized by a court decree. If you're in a civil union, you may only need a notarized joint declaration provided you don't have any minor children together and you both agree to the breakup. No court decree is needed for de facto (common law) couples.
Your property, which may include retirement savings, is partitioned in accordance with certain rules.
- Marriages and Civil Unions
- First, your family patrimony is partitioned, if applicable.
- Next, assets that fall under a matrimonial regime or civil union regime (partnership of acquests, separation of property, community of property, or any other contractual regime) are divided up, if applicable.
- For some property, the terms of partition may be set out in a court decree.
- De Facto (Common Law) Relationships
- The spouses do not owe each other anything, unless they've agreed otherwise (for instance, under a cohabitation contract).
Even if family patrimony rules don't apply, property may still be partitioned and other terms and conditions may apply.
With the exception of the Québec Pension Plan (QPP) and the Canada Pension Plan (CPP), which are partitioned on the basis of recorded earnings, patrimony is divided up either in cash or as a transfer of ownership of assets equal in value to the amount due. Such assets do not have to be part of the family patrimony, matrimonial regime, or civil union regime, nor do they have to come from retirement savings.
Pension Plans and Family Patrimony
Québec's current rules on family patrimony came into effect on July 1, 1989, for marriages and on June 24, 2002, for civil unions. They apply universally, regardless of the date of the marriage or civil union, type of matrimonial or civil union regime, or whether or not the couple has children.
These provisions do not apply in the following cases:
- De facto (common law) couples, unless both spouses have agreed to subject certain property to family patrimony rules
- Married couples who...
- Were married before July 1, 1989, and agreed by notarial deed before January 1, 1991, that they would not be subject to the new provisions
- Filed for divorce, legal separation, or annulment of marriage before May 15, 1989
- Ceased to live together and settled all details of their separation before May 15, 1989
- Married and civil union couples subject to family patrimony rules can waive the right to some or all of the family patrimony during breakup or partition procedures.
- Family patrimony is usually split equally between the 2 spouses, but may be partitioned unequally or not at all when circumstances warrant.
- Certain types of retirement savings are included in the family patrimony, but do not necessarily have to be partitioned:
- QPP or CPP credits accrued by each spouse during the marriage or civil union
- Benefits accumulated during the marriage or civil union under a supplemental pension plan (SPP), RRSP, group RRSP, locked-in retirement account (LIRA), life income fund (LIF), registered retirement income fund (RRIF), or annuity contract
- Most CARRA-administered SPPs and CARRA top-hat plans (régimes surcomplémentaires) are considered part of the family patrimony.
Federal Old Age Security (OAS)
OAS benefits are not usually partitioned. However, a change in your marital status and the amount of income you earn can have an impact on your benefits or eligibility.
For more information, contact Department of Human Resources and Social Development Canada or visit their Website at www.hrsdc.gc.ca.
Québec Pension Plan (QPP)
For the QPP, the credits in each spouse's name for a certain period of time are added up and then divided into 2 equal parts.
The period begins on January 1 of the year of marriage, civil union, or de facto (common law) union and ends on December 31 of the year before the couple broke up or the year during which the court proceedings to end the union began. Certain months may be excluded for instance, months for which QPP benefits were paid out or after one of the former spouses turned 70.
- Marriages and Civil Unions
Partition is automatic (unless waived by an agreement) for a judgment rendered after June 30, 1989, unless otherwise ordered by the courts or the Régie des rentes du Québec.
- Partition may affect your current or future QPP benefits. If you've never contributed to the QPP or you've contributed less than your partner, you may acquire entitlement to benefits or qualify for a higher amount. If the opposite is true, however, you may see your pension drop.
- Partition is not retroactive for benefits already paid out.
- The RRQ may decide not to divide up QPP benefits, particularly if benefits are owing to at least one of the spouses and neither spouse would benefit from partition. If this is the case, the Régie will inform both former spouses.
- Before waiving your right to partition of the credits you've built up during your marriage (or civil union) or proceeding with partition as de facto (common law) spouses, you should first visit the Régie des rentes du Québec Website at www.rrq.gouv.qc.ca/en, under "Living as a couple - Forms", and apply for a partition simulation.
- If you have been married, in a civil union or de facto (common law) relationship more than once, your QPP benefits may be partitioned more than once, but for different periods corresponding to each situation.
- Sharing of QPP pensions between spouses to reduce the tax owing does not affect the credits recorded in each of their names, and comes to an end when the relationship ends or upon request.
- Once partition has been carried out, the Régie des rentes du Québec will inform you of the impact on your QPP earnings and adjust your current benefits accordingly.
For more information, visit www.rrq.gouv.qc.ca/en, under "Living as a couple - Breakdown of union".
Canada Pension Plan (CPP)
If you or your former spouse contributed to the CPP, Department of Employment and Social Development Canada is responsible for the partition of any CPP credits. The rules may be different from those that apply to the QPP. For more information, visit www.hrsdc.gc.ca.
Partition is based on the total credits accrued in your SPP, not the pension payments you've earned or already begun to receive. If you draw a pension directly from your SPP, your payments may be reduced by more than half, in part because its value will fall over time.
As a general rule, you won't lose more than 50% of the total credits accrued in your SPP upon partition, regardless of whether or not the credits were built up during your marriage, civil union, or de facto (common law) relationship.
To find out who is entitled to an evaluation and partition of SPP benefits, refer to the appropriate law. Most SPPs in Québec fall under one of the following four categories:
- SPPs subject to the Supplemental Pension Plans Act for transfers of benefits between spouses (mainly the Québec private sector)
Partition is possible between former married, civil union, or de facto (common law) spouses, regardless of whether they're subject to the provisions on family patrimony. For more information, visit www.rrq.gouv.qc.ca/en, under the headings "Living as a couple - Breakdown of union".
- SPPs administered by Commission administrative des régimes de retraite et d'assurances (CARRA) (Québec public sector)
Partition is only possible between former married or civil union spouses subject to the family patrimony provisions. De facto (common law) couples are not eligible. For more information, see the brochure "Partition of family patrimony" at www.carra.gouv.qc.ca/ang under the headings "Documentation - For members".
- SPPs subject to the Pension Benefits Division Act(federal public sector)
Partition is possible between formerly married and de facto (common law) spouses, regardless of whether or not they are subject to the provisions on family patrimony.
Civil unions, however, are not eligible, unless the relationship could also be considered to be a de facto (common law) union, in which case the de facto (common law) provisions apply. The Pension Benefits Division Act is a federal law that does not recognize civil unions.
For more information, contact the body that sponsors your SPP.
- SPPs subject to the 1985 Pension Benefits Standards Act (federal private sector)
Former married and de facto (common law) couples can partition their SPPs, regardless of whether or not they are subject to the provisions on family patrimony.
Civil unions, however, are not eligible, unless the relationship could also be considered to be a de facto (common law) union, in which case the de facto (common law) provisions apply. The Pension Benefits Standards Act is a federal law that does not recognize civil unions.
For more information, visit www.osfi-bsif.gc.ca, under "Pensions".
You don't have to wait until the plan member begins drawing his or her SPP pension before you can partition your plan. In fact, it's best to have a plan partitioned as early as possible. You can usually request a statement detailing your partitionable benefits. A fee may apply.
RRSPs, LIRAs, LIFs, RRIFs, and Annuity Contracts
Partition is possible, but eligibility and terms may differ depending on the plan or contract and the applicable laws. Whatever the situation, one of the spouses could be entitled to over half of the total benefits, regardless of whether the savings were accrued while the couple were living together.
There are no set rules for determining the amount to be divided other than market value. Reasonable judgment should be used.
Top-Hat Plans, DPSPs, EPSPs, and Retirement Compensation Agreements
As a general rule, these plans are neither part of the family patrimony nor subject to partition rules. If you and your former spouse wish to divide up a plan, refer to the plan's provisions.
Top-hat plans (régimes surcomplémentaires) administered by CARRA are an exception. Not only are they part of the family patrimony, but they're also subject to the same rules as all CARRA-administered SPPs.
Worth knowing about...
- Specific rules apply to any marriage, civil union, or de facto (common law) relationship that ends due to the death of a spouse.
- The partition of property after a breakup and the payment of survivor's benefits to a surviving spouse (e.g., a joint and survivor pension) are 2 separate concepts that shouldn't be confused.
- Under Québec law, civil unions provide couples the same rights and obligations as marriage, whether same sex or not. Federal law does not yet recognize civil unions.
- The definition of de facto (common law) spouse may vary from one jurisdiction to the next. Ask about the specific law to which you are subject.
- The new credits entered under the name of someone who has never contributed to the QPP following partition of earnings entitle them to the same benefits as someone who has contributed from employment income.
- Even if they're still married, legally separated spouses partition (if applicable) their matrimonial regime and family patrimony just as if they were divorced. The term "former spouse" in this capsule includes legally separated spouses.
- For more information on family patrimony, visit www.justice.gouv.qc.ca/english/accueil.asp under "Publications - General Information - Separation and Divorce - Family Patrimony".