When couples separate or divorce in Canada, one important issue that is often overlooked is the division of Canada Pension Plan (CPP) credits. CPP credits can have a meaningful impact on your future retirement income, and decisions about CPP division should be made deliberately and with a clear understanding of how the system works.

CPP division is not about dividing cash today. It is about fairly reallocating retirement credits that were earned during your relationship.

CPP operates on a credit division system designed to reflect the economic partnership that exists during a marriage or common-law relationship.

During your relationship, each spouse earns CPP credits based on their employment income. If one spouse earned more income, they likely earned more CPP credits. If the other spouse earned less, worked part time, or stayed home caring for children, they may have earned fewer or no CPP credits during that same period.

When a relationship ends, the CPP credits earned by both spouses during the time you were together are combined and then divided equally between you.

This is true even if one spouse did not work outside the home or did not make CPP contributions during the relationship. CPP credit division is designed to recognize that both spouses contributed to the family’s economic life, even if only one earned income.

CPP division is administered by Service Canada, not by the court. Your Separation Agreement sets out whether CPP credits will be divided or waived, and that agreement is submitted to Service Canada as part of the application process.

CPP credit division does not transfer money from one spouse to the other today.

Instead, it adjusts each spouse’s CPP record. After the division:

• Each spouse’s CPP contribution history is recalculated

• The higher earning spouse may see a reduction in their future CPP benefit

• The lower earning spouse may see an increase in their future CPP benefit

This adjustment only affects the CPP credits earned during the relationship. CPP credits earned before the relationship began or after separation are not affected.

CPP credit division generally applies if:

• You were married, or

• You were in a common-law relationship and lived together for at least 12 consecutive months, or

• You are the parents of a child together

CPP credits can be divided when you separate or divorce, as long as you meet the eligibility requirements under CPP legislation.

When dealing with CPP credits in your Separation Agreement, you have two main options.

The most common and default approach is to divide CPP credits earned during the relationship.

This option reflects the intent of the CPP system and ensures that both spouses share equally in the retirement benefits generated during the time you were together. For many couples, this results in a fairer long-term outcome, especially where one spouse earned significantly more income.

When you choose this option, Divii will include the appropriate clauses in your Separation Agreement to confirm that CPP credits will be divided in accordance with federal legislation. The agreement is then submitted to Service Canada with the CPP credit division application.

In some cases, spouses may agree to waive CPP credit division and keep their own CPP records as they are.

If you choose this option, Divii will include clear waiver language in your Separation Agreement. No CPP credit division application is required.

Waiving CPP division should be done carefully. Once waived, you generally cannot apply for CPP credit division later. Because CPP benefits can be significant over time, it is often wise to obtain legal advice before waiving this right.

CPP benefits may look modest when viewed as a monthly amount, but their long-term value is often underestimated.

CPP credit division is often one of the most valuable adjustments available to spouses who earned less income during the relationship.

CPP credit division is not automatic. An application must be made to Service Canada.

Who can apply

Either spouse can apply for CPP credit division.

Deadlines

• If you were married, there is generally no time limit to apply, unless one spouse has died. In that case, the application must usually be made within 36 months of the date of death.

• If you were in a common-law relationship, the application must generally be made within four years of separation.

CPP credit division is a long-term financial decision that deserves careful consideration.

Before deciding whether to divide or waive CPP credits, it is important to understand how much CPP was earned during the relationship, how division may affect each spouse’s future benefits, and how CPP fits into the overall property and support arrangement.

Whether you choose to divide CPP credits or waive the division, Divii will include the appropriate clauses in your Separation Agreement so your decision is clearly documented and legally effective.

Taking the time to understand CPP credit division now can help protect your retirement security and reduce the risk of regret later.