What Does Canada Pension Plan (“CPP”) Credit Splitting Mean?
The Canada Pension Plan (“CPP”) is the pension plan to which you’ve been contributing during your work life. It is available for you to start collecting as early as age 60 and as late as age 70. Your CPP contributions are either deducted off of your pay cheques (with your employer matching your contributions) or are contributed by you (if you are self-employed) with your taxes.
If you’ve ever noticed that at some point in the year, your take home pay increases, it’s likely because you have reached the maximum annual contribution towards your CPP, and your employer no longer has to take further deductions from you. If you have not experienced this, it is likely because you have not made the annual maximum contributions. The amount of the pension you will receive will be based on the amount of your contributions (and the age at which you start to take your pension), so greater contributions will mean a higher monthly pension.
Our laws provide that, upon relationship breakdown, the contributions that you and your spouse or common-law partner made during the time you lived together can be equally divided. This is what is referred to as “Credit Splitting”. Credit Splitting is the default process unless your province allows you to choose not to do so. Alberta is one of the provinces that allows you to opt out as long as you have agreed not to do so in writing. If you have not made maximum contributions each year, a credit split could benefit you in retirement.
While the process is said to be “automatic” it is necessary to send all required information to the Canada Pension Plan in order for them to initiate the process. Search “Canada CPP Credit Split Divorce” or simply “ISP1901″ to find the forms for this.
Upon receiving the necessary information, the Canada Pension Plan will adjust what’s in each of your CPP accounts so that the amounts are the same for both of you. They will pool and split down the middle all contributions made by each of you in the first year that you lived together, the last full year you lived together, and all the years in between.
After the Credit Split has been done, you will continue to contribute to your own CPP, and your former spouse will continue to contribute to their own CPP account. You will not be tied to each other as to your future CPP, any further contributions you may make, or any choices you may wish to make about when to draw your CPP.
If you divorced after January 1, 1987, there is no time limit for applying for the Credit Split unless your former spouse has died, in which case you have 36 months to apply. If you were not married but lived together for at least 12 consecutive months, the application must be made within 48 months of the date you separated unless your former partner agrees in writing to waive this time limit.
Marla has been an integral part of the Collaborative Divorce movement in Edmonton, being one of the founding members of the Edmonton Association and spearheading the initial training in Edmonton in 2001 by bringing in the founder of Collaborative Divorce, Stu Webb. She continues her role with the Edmonton Association on an almost daily basis.
Having been influenced early on in her legal career by the mediation training she received over 35 years ago, Marla gave up court as an option well before the advent of Collaboration as a formal process. As both a Collaborator and a Mediator, Marla is practical, intuitive and creative. She helps people going through marriage breakdown, relationship issues and parenting problems create their own property division, parenting plan, and financial and support agreements. While considering legal rights and obligations, Marla’s focus is on creating a safe environment to empower her clients to craft decisions best suited to their own needs and interests.
Region: Edmonton and Grande Prairie
Profession Type: Family Lawyers
Firm: Miller Boileau Family Law Group
Affiliations: Registered Family Mediator
Website: www.millerboileau.com
Address: 10981 - 127 Street NW
City: Edmonton
Province: Alberta
Postal: T5M 0T1
Phone: (780) 482-2888
Fax: (780) 482-4600
