Dividing up family property following a divorce means more than just deciding who keeps the family home. CPP credits built up by a couple while they lived together are considered to be family assets. So, even if you stayed at home to raise your children and did not contribute to CPP, or only contributed for a short duration, CPP credits can be divided equally in the same way that other assets are. This division is called “credit splitting”.
Through the “credit splitting” process, the pensionable credits of both spouses are “equalized” so that each member comes out of the relationship with the same amount of CPP benefits. Thus the spouse with the lower income will see an increase in the CPP benefits they receive, and the higher income earner will see a decrease in their CPP benefits.
Generally a spousal agreement does not prevent a credit split. In British Columbia, however, couples can agree to NOT split their CPP pensionable credits. If you have a separation agreement or court order that states you won’t be equalizing the CPP pensionable credits, then a credit split cannot be done.
You do not have to be divorced in order to make an application for a CPP credit split. You can apply after you have been living apart for at least one year and as long as you lived with your spouse or common law partner for at least one full calendar year. The amount of pensionable credits that will be “equalized” will be only for the full years you cohabited together.
If you have questions and concerns about your CPP benefits, you should discuss them with your lawyer before negotiating a property division settlement.
Gurinder Bains, Vancouver & Victoria Lawyer