How does CPP/QPP credit splitting work in divorce or separation?

When a couple divorces or separates, at some point, they work through an equitable division of their assets. However, they might not consider how their break-up will affect their Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) benefits. This can be achieved by splitting the CPP or QPP contribution credits they’ve made during their employment.

Qualifying for credit splitting

Generally, whether you qualify for CPP/QPP credit splitting will depend on when you divorced, separated or ended your common-law relationship.

You can’t apply for a CPP/QPP 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 any time before you or your spouse turned 18 or after you or your spouse turned 70.
• For any time you or your spouse was a beneficiary of a retirement pension under the CPP or QPP.
• For any time you or your spouse was considered disabled for the purpose of CPP/QPP disability benefits.
• If your marriage ended in divorce or annulment before January 1, 1978 because the CPP/QPP didn’t exist before then.
• If you’re applying in respect of a common-law union before January 1, 1987.

If your marriage ended in divorce or annulment, you may qualify if:

• You lived with your former spouse for at least 12 consecutive months.
• You or your former spouse notifies Service Canada and provides the necessary information.

If your marriage ended in divorce or annulment between Jan. 1, 1978 and Dec. 31, 1986, you may qualify for a credit split if:

• You lived with your spouse for at least 36 consecutive months.
• The divorce or annulment was recognized by Canadian law.
• You or your former spouse applied in writing and sent Service Canada the necessary documents within 36 months of your marriage ending.

If you’re still married and your separation occurred on or after January 1, 1987, you may qualify for a credit split if:

• You lived with your spouse for at least 12 consecutive months.
• You’ve lived apart for at least 12 consecutive months.
• You or your spouse applies in writing and sends Service Canada the necessary documents.

If your common-law union ended on or after January 1, 1987, you may qualify for a credit split if:

• You lived with your former common-law partner for at least 12 consecutive months.
• You’ve lived apart for at least 12 consecutive months (except in the case where your former common-law partner died during this period, in which case you may still qualify).
• You or your former common-law partner applies in writing and sends Service Canada the necessary documents within 48 months of the date you began living apart (unless your former common-law spouse is still alive and agrees in writing to waive the 48-month time limit).

There is no time limit to apply, unless your spouse dies, in which case you must apply within 36 months of the date of death.

Do couples have to split their CPP credits?

In every Canadian province and territory except British Columbia, Alberta, Saskatchewan and Quebec, CPP credit splitting is mandatory. Those provinces allow CPP credit splitting to be negotiated.

Why should couples split CPP credits?

Credit splitting helps balance CPP or QPP benefits when 1 partner worked throughout the relationship and the other partner didn’t because they were parenting or were still in school.

CPP credit splitting can help ease the financial burden of a lower earning spouse after divorce.

It can also provide potential income tax savings for both partners.

You should consult your advisor to determine if CPP credit splitting is the right option for your situation.

If you decide to apply for CPP credit splitting, either spouse (or their representative such as a lawyer) can apply. You can apply for CPP credit splitting even if you’ve remarried or are in a new common-law relationship.

What's next?

Now that you know more about CPP/QPP credit splitting, why not meet with an advisor to:

• Determine if credit splitting is right for your situation.
• Work on a post-divorce or separation budget.
• Consider how else separating may impact your retirement financially, such as how divorce can impact your pension, RRSP and life insurance.
• Build a plan to achieve your post-divorce or separation saving goals.

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.

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