CPP Pension Splitting

CPP splitting can be used to describe both processes through which spouses either compulsorily or voluntarily share benefits under their Canada Pension Plan. CPP applies throughout Canada, except in Quebec which has its own Pension Plan (QPP). 

Depending on the circumstances, a couple may apply for either CPP credit splitting or CPP pension splitting. They could also apply for the Quebec equivalent, in deserving cases. There are markedly different circumstances governing each application though. 

Credit splitting applies to married couples or common-law spouses who have obtained a divorce or are legally separated. When CPP credit splitting divorce occurs, the credits for contributions that both spouses have made to the CPP will be equally divided between both spouses. Spouses in a new marriage or relationship may still apply, if they qualify under the previous relationship. 

CPP credits will generally be split mandatorily after couples end their relationship and either spouse may apply. However, in some instances, a spousal agreement between the spouses may prevent a credit split. If you signed an agreement before June 4 1986, specifically giving up your right to apply for a CPP split, then a division cannot be done. 

If the agreement was signed on or after June 4, 1986, you may still be eligible to receive a CPP split. However, if you live in a province where the law allows couples to specifically exclude CPP splits, a division cannot be done. This is the case in Alberta, British Columbia, Saskatchewan and Quebec. 

Otherwise, if the agreement was signed before June 4, 1986 and was worded generally or if it was signed after June 4, 1986 and you live in Ontario, you may be able to apply. 

Who is eligible?

Generally, eligibility for CPP credit splitting divorce depends on when you were divorced or separated, or ended your common-law relationship. In any case, you cannot apply for a CPP split: 

• For any year in which the total pensionable earnings of you and your spouse is less than twice the Year’s Basic Exemption;
• For the period before you or your spouse turned 18 or the period after you or your spouse turned 70;
• For the period when you or your spouse was a beneficiary of a retirement pension under the CPP or QPP; and
• For the period when you or your spouse was considered disabled for the purpose of CPP or QPP disability benefits. 
• If your marriage ended in divorce or annulment before January 1, 1978. The CPP did not exist before that time. 
• If you are applying in respect of a common-law union before January 1, 1987. 

You can check here to see Service Canada’s eligibility rules for applying for CPP credit splitting. If you or your spouse lived or worked in Quebec, the QPP rules may also apply to you. Check here to see if you are eligible. 

It is possible for spouses to share their CPP retirement pension with their current spouse or common-law partner. The person willing to do so has to be receiving their pension already or be eligible to receive it. Also, the person must be living with their spouse or common-law partner at the time of application. 

Under the CPP pension sharing rules, there are two ways through which a pension can be shared: 

• The pension can be shared if only one spouse contributed to either CPP or QPP. 
• If both spouses contributed, then both may receive a share of both pensions. 

How much of the pension can be shared will be based on how many months both spouses lived together during their joint contributory period. This is the period when either spouse could have contributed to the pension. 

It must however be noted that post-retirement benefits are not eligible for pension sharing.

Once the application is approved by Service Canada, pension sharing starts. However, it will stop in any of the following circumstances that occurs first: 

• One month after Service Canada approves a cancellation request submitted by both spouses. 
• The month in which both spouses divorce
• The month in which the spouse or common-law partner who has never paid CPP or QPP starts contributing
• The month in which either spouse dies. 

If the spouses were separated at the time of application, they will not be qualified. If they separate after pension sharing is approved, sharing ends in the 12 month after the start of separation. For more specific information about pension sharing in Quebec, you can check here. 

In certain circumstances, yes. CPP credit splitting divorce can be very useful to help a lower earning spouse cope with expenses and living after divorce. In fact, the credit splitting is often used as an equalizer that helps ensure that the less-well off spouse will not be left in the lurch. 

CPP pension sharing can also result in tax savings for the sharing couple. While it will not increase the overall amount that either or both spouses may receive, it may help save on their tax liability. 

So, CPP splitting might make sense for you. However, to be sure that you’re making the right choice, it makes sense to contact a certified financial planner that can help advise you on your options.

There are certain services that provide CPP pension splitting calculator services. These calculators may help you understand what your possible liabilities will be in the event of a CPP pension split or a credit split. 

You can use our property equalization tool to estimate what your finances will look like after going through a divorce. This can help you plan properly and decide what your response should be to a CPP application by your spouse. 

It is however important that you do not put too much stock into calculators. Ideally, you should contact a professional certified financial planner to help you identify the pros and cons of agreeing to a CPP pension split or credit split.