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  • Company Pension and CPP

    Common law relationship has ended after 20 yrs, we have 2 children together as well. We are trying to divide things through lawyers, so far its not going so well. My questions to the people on this form are: is she entitled to have my company pension that I have paid into from my pay check each week, my company matches what ever I put into it, so I don't know what she's entitled to. Also the CPP, not sure what the law is on these issues. The next question is, if she is entitled to half of my pension can that money be used as part of the equalization of the stuff we have.
    Any input on this would be great. Thanks people

  • #2
    PENSIONS
    One of the most difficult and controversial aspects of property settlement involves pensions. A pension is considered property because it is a right to receive money in the future that one spouse has on the date of separation. Valuing a pension is a technical process requiring the involvement of an actuary.

    The pension holder obtains a pension statement from his employer showing the value of his pension as though his employment terminated on the separation date. This means we look at what his pension would be worth if the valuation day was his last day of work. The pension statement will include a statement as to the monthly payout of the pension earned as of that date. The actuary takes that value and multiplies by the number of months the pension holder is likely to collect that pension before he dies. If the pension is indexed to inflation, then a further calculation is made to adjust the value upward to reflect indexation.

    Finally, a deduction is made to reflect the taxes the pension holder will pay on his pension income. There are also other adjustments that may be made depending on the type of pension it is.

    Controversy can arise because the pension holder is expected to account for the value of his/her pension in spite of the fact that he or she may never collect the pension. Unlike other assets, a pension does not have a fair market value because it cannot be sold and the pension holder cannot generally cash it in. As a result, the pension holder often feels that it is unfair to assign a cash value to the pension that he or she has to account for on equalization.

    If a person has RRSPs or stocks he/she can either cash them in or transfer them to the other spouse to satisfy an equalization payment. If he or she has cash savings a cheque can be written. To the pension holder, the fairer way to deal with the pension would be to provide that the other spouse receive a share of the pension when it begins to be paid. Unfortunately, this is generally not permitted under pension plans or under the law.


    Family Law Toronto :: Family Property :: www.familylawtoronto.com


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    • #3
      Canada Pension Plan (CPP) - Credit Splitting Upon Divorce or Separation


      Canada Pension Plan (CPP) - Credit Splitting Upon Divorce or Separation

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      • #4
        Divorce

        If you are going through a divorce and you and your ex-spouse are looking at dividing up your assets, the Court is required to take your pension rights into account.
        Through the Court, a divorcing couple can choose to:
        • balance the pension rights against another asset, such as the matrimonial home (this is known as Pension Offsetting); or<LI sizset="17" sizcache="0">arrange that when one party's pension eventually comes into payment, a portion of it will be paid to the other party (this is known as Pension Earmarking); or
        • split the pension at the time of the divorce to give both parties their own pension pot for the future (this is known as Pension Sharing).

        Generally speaking, you will need to know what you and your former spouse's pensions are approximately worth. This will mean that both of you will need to ask your pension providers for valuations of your own pension pots. Your former spouse will not have any right to know what your pension value is without your consent.
        You will also need to understand the implications of each of the three methods of taking pension rights into account in a divorce settlement.
        Be aware that transferring from a final salary or career average scheme to a money purchase scheme (or personal pension plan) carries a number of risks. You should seriously consider taking independent financial advice before sharing a pension so that you understand whether you are getting value for money.
        The Court can issue a Court Order to occupational pension schemes (funded and unfunded, approved or unapproved), personal pension schemes, retirement annuity contracts, and Section 32 Buy-out Plan.
        The Court can consider pension plans that you and your former spouse are currently paying into, plans that you have frozen in the past and plans that are currently paying you an income.
        Arrangements that are outside the scope of the legislative provisions covering divorce are state benefits, Equivalent Pension Benefits earned between 1961 and 1975, and any pension rights a person is in receipt of by virtue of being a widow, widower, or dependant.

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        • #5
          Pension Offsetting

          All the couple's assets are taken into account and pension benefits are offset against other assets (e.g. the matrimonial home). The party with the pension rights keeps them for him/herself and the other party is given the benefit of other assets, such as the right to live in the matrimonial home.
          It can be difficult to achieve a fair share of a couple's total assets by offsetting a pension pot against other assets. This may be because pension pot is by far the greater in value. Also pension values tend to fluctuate more than, say, property values. If it turns out to be difficult to achieve offsetting, one or other of the alternative bases is then likely to be used.
          Earmarking

          Pension Earmarking was introduced by the 1995 Pensions Act, for divorce petitions filed on or after 1 July 1996 (or 19 August 1996 in Scotland).
          The pension scheme, on instruction from the Court, pays a specified amount of the member's pension and/or lump sum (in England, Wales and Northern Ireland) or a specified amount of the member's lump sum only (in Scotland) to the ex-spouse. The amount is specified at the time of the divorce but as with all periodical payment orders, either party can apply to the Court to have the amount varied. The payment is made when the spouse with the pension pot retires, say, or when they die.
          Earmarking has not proved entirely satisfactory in practice, as it does not achieve a 'clean break' and does not enable the ex-spouse to receive retirement income until the spouse with the pension pot retires. An additional drawback is that if the Divorce Order is for the regular payment of a pension, those payments will stop when the spouse with the pension pot dies or if the party receiving the earmarked pension remarries (for reference, the right to a lump sum under an Earmarking Divorce Order does not stop on remarriage).
          Pension Sharing

          The Welfare Reform & Pensions Act 1999 gave powers to the Court to split pension rights between husband and wife on divorce. This legislation is not retrospective and only applies to proceedings for divorce or annulment filed on or after 1 December 2000.
          The basic concept is to separate the ex-spouse's benefit entitlement (as specified in the Court Order) from the pension scheme member's, so that there is a 'clean break'. A Pension Sharing Order is issued that creates a Pension Credit Member (the ex-spouse) and a Pension Debit Member (the member).
          The Pension Credit is based on the member's Cash Equivalent Transfer Value (CETV). The Credit will be a percentage of the CETV, not a fixed sum of money. The CETV is calculated as of the day before the Pension Sharing Order takes effect, so it can be higher or lower than the value disclosed at the start of the divorce proceedings. The Pension Sharing Order takes effect from 'the date on which the Decree Absolute of Divorce or nullity is pronounced or if later, either (a) 21 days from the date of this Order, unless an appeal has been lodged in time, in which case (b) the effective date of the Order determining that appeal'.
          EXAMPLE:

          David and Claire are getting divorced. Claire does not have a pension; David has a personal pension plan. They instruct solicitors in March and David asks his pension company for a valuation. At that time his pension is worth £80,000. David and Claire decide that a 50:50 split of his pension is fair, so the Court orders the pension provider to give Claire a Pension Credit of 50% of David's pension. Claire is therefore expecting to get about £40,000 to put towards a pension of her own. The Decree Absolute comes through in July: at that point David's pension has gone up in value to £82,000, so Claire actually gets £41,000 as her share. If David's pension had dropped in value, to say £76,000, Claire would only get £38,000, as her entitlement can only be to 50% of David's pension.
          The Pension Credit is transferable to a pension arrangement of the ex-spouse's choosing, as long as that pension arrangement can accept the transfer.
          If the ex-spouse makes no choice, the trustees/scheme managers can choose whether or not to offer the ex-spouse membership of their scheme. That is, schemes are permitted to insist on a transfer out (an 'external transfer'), which will typically be to an insurance contract. However, transfer to a contracted-out scheme (money purchase, final salary or career average) of contracted-out Pension Credit benefits (termed 'safeguarded benefits') requires the consent of the ex-spouse.
          Be aware that transferring from a final salary or career average scheme to a money purchase scheme (or personal pension plan) carries a number of risks.
          Final salary, career average and money purchase schemes could not be more different:
          • the final salary or career average scheme provides benefits based on a fixed formula, with reference to a member's completed service and earnings. For example: Pension = (Service/60) x final salary.
          • the money purchase scheme provides benefits based on the investment growth of the contributions paid into the scheme and the rates available at retirement to convert the pot into an annuity.
          It is therefore fair to expect that the benefits available at retirement will be vastly different. You should seriously consider taking independent financial advice before accepting an external transfer so that you understand whether you are getting value for money.
          If a transfer out is not made then the scheme may provide an 'internal transfer', allowing the ex-spouse to become an own right member of the scheme. The pension credit benefits need not be on the same basis as those in the scheme. For example, the pension credit may be on a money purchase basis even though the scheme is final salary or career average.
          Pension credit members are entitled to the normal increases awarded to members with preserved (frozen) pensions.
          Schemes are permitted to charge for dealing with the administration of pension sharing. Basically the cost involved in administering pension sharing should not be borne by the scheme, other members or the taxpayer. The scheme must supply a schedule of charges to the couple involved on their first enquiry. Any cost not directly relating to implementing a specific divorce order (e.g. amending the scheme rules, training administration staff, altering computer systems etc) will be borne by the scheme. The National Association of Pension Funds (NAPF) produces a table of recommended charges to be used as a guide to the industry. This can be found on the NAPF website.

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          • #6
            10. Do we have to have our credits split?

            Since January 1, 1987, once Canada Pension Plan has the necessary information about your legal divorce or annulment, your Canada Pension Plan pension credits must be split, unless there is a valid spousal or common-law union agreement signed in one of the provinces mentioned in question 9.
            But, if you are separated or have left a common-law relationship, there may be a credit split only if you (or your former spouse or common-law partner) choose to apply for it. In these cases only (not in cases of divorce or annulment) the applicant can ask to withdraw the application within 60 days of being notified of the credit split.

            http://www.servicecanada.gc.ca/eng/i...s/credit.shtml

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            • #7
              Hey firsttimer, rather than dropping all that text into several posts in the same thread, why don't you just drop a link into the post with a short sentence describing what you are linking? Then people who are interested in the topic can choose to link to the other site, rather than having it force fed on them.

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              • #8
                In my case I was entitled to half his pension for the time we were together. The amount was put into a locked in RRSP that cannot be accessed until I am 55.

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                • #9
                  I received a request from DDD to add more information so I did.

                  Comment


                  • #10
                    The couple was not married and any issue of divorce cannot and should not apply.
                    I am in the same situation, common law for 25 years and was looking for the same answer. My pension rules define spouse as defined in the FLA. I belong to the pension plan as a condition of employment; no choice.

                    In a common law relationship, and she has not paid into the plan directly, should she not be entitled?

                    Comment


                    • #11
                      Depends on the rules of the pension plan. The Family Law Act doesn't automatically give a spouse any share of the pension, but the pension's own rules may include common law spouse's, so talk to your pension rep and get your answers.

                      Comment

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