Decisions to be made prior to partition

Several elements come into play when reaching a partition agreement following the breakdown of a union or filing an application for partition with the court.

The Civil Code of Québec, the Regulation respecting supplemental pension plans and the Regulation respecting voluntary retirement savings plans all set requirements as to the method of carrying out partition and the amount to transfer to a former spouse. To avoid any unpleasant surprises, it is important to know the requirements.

Partitioning the benefits accrued in a pension plan equally is not always the best solution. The consequences of the partition must be carefully assessed.

Limit of 50% of the benefits

Former married spouses or spouses in a civil union

The Civil Code of Québec provides that a plan member cannot transfer to his or her former spouse more than half of the total value of his or her benefits (and not half of the value of benefits accrued during the marriage or civil union) as established on the date on which the property was valuated (institution of the action or end of the conjugal relationship).

The limit applies to the total value of all of the benefits accrued by the member in his or her supplemental pension plans and voluntary retirement savings plans, if there are more than one. The calculation is carried out based on the amount specified in the partition agreement or the judgment, without taking into account the interest to be added.

The limit applies to partition of the family patrimony only. There is no limit when a plan is partitioned for another reason.

Former de facto spouses

Under the Supplemental Pension Plans Act and the Regulation respecting voluntary retirement savings plans, de facto (common law) spouses cannot agree to transfer more than half of the total value of benefits accrued by the member as established at the end of their conjugal relationship.

This limit is based on the amount specified in the agreement, without taking into account the interest to be added. Unlike married spouses or spouses in a civil union, the limit must be respected for each of the member's pension plans.

Interest on the amounts

Under the Regulation respecting supplemental pension plans and the Regulation respecting voluntary retirement savings plans, in addition to the amount provided for in the judgment or agreement, the former spouse receives the applicable interest, even if the judgment or agreement makes no mention of it.

The interest is calculated from the date of the valuation of property (generally the date of the institution of the action or end of the conjugal union), until the date on which the money will be transferred to the former spouse's name.

Rates used to calculate interest

  • Savings in the form of capital (capital benefits): the rate of return obtained from investments. If the rate of return is negative, the amount to be transferred to the former spouse is decreased by that rate.
  • Savings in the form of a pension (pension benefits): the rate used by the actuary to valuate benefits.

It serves no purpose, and is sometimes illegal, to set the date of the valuation of benefits on the same date as the judgment so that a former spouse will receive exactly half of the plan member's benefits on that date. The regulations provide for the mandatory addition of interest to ensure that former spouses are not penalized because of the length of time that passes before receiving their portion of the benefits.

Locking-in of the amount transferred

Since the aim of a pension plan is to give members an income at retirement, except in special cases, the amounts accrued can only be withdrawn at retirement. This is called "locking in."

Except in special cases, the amounts locked-in apply to both the member and his or her former spouse. The former spouse should not count on that money to buy a new house, for example.

If the amounts are locked in, the plan administrator carries out partition by transferring the amount to which the former spouse is entitled into an authorized transfer instrument of the former spouse's choice.

If the amounts are not locked in, the former spouse may receive his or her share of the partition in cash or transfer it to an authorized transfer instrument of his or her choice.

Amounts received in cash are taxable. Transferring the money to an authorized transfer instrument defers taxation.

The former spouse may choose whether he or she wants payment in cash or a transfer. In the latter case, he or she must choose the financial institution and the instrument to which he or she wants to have the money transferred.

Cases where the amounts are locked in

All amounts from supplemental pension plans and voluntary retirement savings plans are locked in, except in the following cases.

Cases where the amounts are not locked in

  • Amounts from a non locked-in account under a simplified pension plan (SIPP) or a voluntary retirement savings account (VRSA).
  • Amounts not locked-in for the member, for example, voluntary contributions paid to a supplemental pension plan (SPP) that have not been converted to a pension.
  • Former spouse who has not lived in Canada for at least 2 years.
  • If the amount to be transferred (capital + interest) is less than 20% of the maximum pensionable earnings (MPE) for the year in which the application for partition is filed, i.e. $13 320 in 2023. The MPE is established in conformity with the Act respecting the Québec Pension Plan.

The effects of partition on retirement income

Whether or not the member is retired, former spouses do not share a pension, but an amount representing the value of the pension.

Effect on income security

Pension benefits allow a member to determine in advance what his or her retirement income will be. They provide better income security than capital benefits. If these benefits are partitioned, the member's pension decreases, and his or her former spouse acquires capital, not a pension. It is often possible to limit this loss of financial security.

Example

Both spouses are members of a defined-benefit pension plan. The value of one spouse's pension is $100 000, and the value of the other's is $140 000.

If each spouse transfers half of the accumulated value to the other's pension plan, each one will lose a considerable portion of his or her pension and receive capital.

If one spouse gives $20 000 to the other, i.e. the difference between the value of the benefits they have accrued under the plan, one will keep his or her pension intact, and the other will lose far less of his or her pension.

Effects on the retired member

If the member is retired and gives his or her spouse half of the value of his or her pension, his or her pension decreases by more than 50%.

The member's former spouse does not receive a pension from the plan, but an amount that he or she can use to produce a retirement income, the amount of which will depend on several factors, which he or she should evaluate with the help of a financial planner.

Legal references

The Gouvernement du Québec publishes its Web pages in French. Consistent with the Charter of the French Language and to inform stakeholders outside Québec, this page is also published in English.
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