In Canada, pensions are generally considered to be “property” and not “income” under provincial matrimonial property law.  This is true even if the plan member is retired and the pension is in pay.

 

If a marriage ends, then as a general rule each party is entitled to half of the total property acquired during the marriage.  This is called “equalization” of family property.  Contrary to popular belief, this does NOT mean that the pension must be divided in half.  Each spouse is entitled to half of the total family property, not half of each individual asset.

 

In some provinces, pensions are rarely divided.  Elsewhere, pensions are almost always divided.  There are significant financial ramifications to a pension division, both for the plan member and for the spouse.  It is not a settlement approach that should be taken lightly.  In particular, both parties should get advice from an expert before agreeing to a lump-sum transfer from a pension plan to a Locked-in Retirement Account (LIRA).


Independent Valuation or Review of Administrator's Valuation


It’s usually advisable to confirm the value of the pension BEFORE deciding how family property will be equalized.  In Ontario, most (but not all) pension administrators are required by law to calculate the Family Law Value of a pension if asked.  We will review and verify the administrator's Statement of Family Law Value if you wish.


Elsewhere across Canada (and sometimes in Ontario), it is an independent actuary who will determine the value of the pension for matrimonial property purposes.  Here’s a list of the information we need if you want us provide you with a pension valuation.


Income Tax Adjustment Report


Any value provided by the pension administrator will be a "before tax" amount, but it is an "after tax" value that is required if you intend to equalize property without splitting the pension.  If you want us to provide an income tax adjustment or contingent tax liability calculation, here's the information we need.