In British Columbia pensions are considered family property and are subject to division during separation or divorce. Understanding how this process works is important for anyone navigating a separation, as pensions often represent one of the most valuable assets in a relationship.

In British Columbia, the division of pensions is governed by the Family Law Act and the Pension Benefits Standards Act. Under these laws, the value of pensions earned during the relationship is divided between spouses, typically in equal shares unless a Separation Agreement specifies otherwise.

Special rules may apply for different types of pension plans, including employer pensions and government pensions so it’s important to understand the specific pension plan and any potential tax implications.

It's important to note that if pension income is being divided as property, it should not be counted again as income when calculating spousal support. This prevents what's known as "double-dipping."

Several types of pensions may be divided during separation. The following are types of pensions that might be addressed in your Separation Agreement:

Defined Benefit Pensions: These types of pensions provide fixed monthly payments upon retirement, based on factors like years of service and salary.

Defined Contribution Pensions: These pensions are based on contributions by the employee/employer into an account, with retirement benefits depending on investment performance. These pensions should have a before-tax value, similar to RRSPs.

Canada Pension Plan (CPP): This is a government pension plan that can be divided upon separation.

Local Pensions: These types of pension are often related to business, government, or organizations in BC.

Extra-Provincial Pensions: These pensions are related to businesses or organizations outside BC, including federal or international pensions.

People often feel strongly about dividing pensions – they often come with emotional attachment – but legally, they are treated like any other savings account.

The portion of the pension accrued during the relationship is considered family property and subject to division. So that means Only the pension portion accumulated before or after the relationship is excluded from division.

It's important to note that it's uncommon for pensions, CPP, or RRSPs not to be divided, as both spouses contributed to future planning, even if they are now separating.

The pension value is determined by the period of time during the relationship when contributions were made.

So it's important to keep track of key dates. The date of cohabitation, separation, and pension contributions are necessary in determining how much of the pension is family property. In cases where the spouse contributed to the pension before or after the relationship, only the portion during the relationship is divided equally.

For example: If a couple was together for 20 years and one spouse contributed to their pension for 10 years during the relationship, that 10-year portion is divided equally.

The default method for Defined Benefit Pensions is to share pension payments at retirement. The non-member spouse receives a share of pension payments directly when the member spouse retires.

This method is common because it doesn’t require upfront costs, and many people cannot afford to buy out the pension. The division is laid out in the Separation Agreement, which is sent to the pension plan administrator for execution.

Getting a pension valuation is typically done if there are funds to buy out the other spouse's interest in the pension. The pension can be valued by an actuary (typically costs between $1,000 to $2,000). The actuary provides a range of values based on the expected retirement date, both before and after taxes.

The valuation is often used to balance the high value of one asset (e.g., family home) against the pension.

Pension statements typically don’t reflect the full value of the pension but only the contributions made by the pension owner. For equalization, you need to assign a value to the pension before-tax value for RRSP or other registered assets, and after-tax value for non-registered assets (e.g., house or business).

The non-member spouse can waive their right to the pension, which requires no valuation. If you're considering waiving your right to the pension, it’s advised to seek legal advice, as pensions are valuable assets.

The non-member spouse can have their share of the pension transferred to an RRSP or LIRA, avoiding immediate taxation. The pension should be assigned a value (before-tax) for the transfer. The value is then included in the equalization calculation for registered property.