# Is a CPP credit split really mandatory after a divorce?



## Dogger1953 (Dec 14, 2012)

It makes me really angry, that Service Canada's answer to this question seems to generally be "Yes", without telling you the whole story.

Here's a copy & paste from the legislation, so you can read the truth:
_*"When mandatory division to take place
55.1 (1) Subject to this section and sections 55.2 and 55.3, a division of unadjusted pensionable
earnings shall take place in the following circumstances:
(a) in the case of spouses, following a judgment granting a divorce or a judgment of
nullity of the marriage, on the Minister’s being informed of the judgment and receiving
the prescribed information;"
*_
As you can see, it's really only mandatory once someone informs CPP about the divorce (ie, someone must complete a form, that in most people's mind would equate to an application for a credit split) and provides all of the necessary information (dates of marriage, separation, divorce etc, as well as whether there's any applicable separation agreement that might prevent a credit split). 

The only thing that's truly mandatory, is that Service Canada has to process such an "application" once it has been received, and it can't be undone once it's done (except in one specific case where both parties are receiving their CPP at the time of the credit split, and both of their pensions decrease as a result of the credit split).

I had a client today, who had been told that a credit split was mandatory when she applied for her CPP retirement pension in 2012. She wasn't told that the "mandatory" only started once she completed the "application" for a credit split. She also wasn't told that as a result of the credit split and because she was eligible for the child-rearing provision (CRP), the amount of any decrease to her ex-husband's CPP might be significantly more than any resulting increase in her CPP.

She wasn't too happy when I told her today, that the credit split only increased her CPP by $23.78 monthly, and it decreased her ex-husband's by potentially as much as $184.70 (I don't have access to his full CPP record of earnings now, so it could be less if he doesn't have any/many other years of low earnings).

Wouldn't it be nice if Service Canada had told her of this potential impact, and allowed her and her ex-husband to negotiate some other arrangement that might have had them each better off by approx $80 monthly, indexed, for life!


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## OhGreatGuru (May 24, 2009)

I think you are grasping at straws. The intent is that division is mandatory, except as provided 55.2 & 55.3. The reference to the application simply deals with the timing of when they calculate the division and implement it.

Section 55.2 allows partners to negotiate non-division of CPP as part of the divorce settlement. But it must be done before the decree, with approval of the court. If this has not been done, then the minister must divide the CPP as per 55.1.

PS Their divorce lawyers should have briefed them on this. Maybe you should hire yourself out as a consultant to divorce lawyers on how to calculate the effects of CPP splitting.


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## Dogger1953 (Dec 14, 2012)

OhGreatGuru said:


> I think you are grasping at straws. The intent is that division is mandatory, except as provided 55.2 & 55.3. The reference to the application simply deals with the timing of when they calculate the division and implement it.
> 
> Section 55.2 allows partners to negotiate non-division of CPP as part of the divorce settlement. But it must be done before the decree, with approval of the court. If this has not been done, then the minister must divide the CPP as per 55.1.
> 
> PS Their divorce lawyers should have briefed them on this. Maybe you should hire yourself out as a consultant to divorce lawyers on how to calculate the effects of CPP splitting.


OGG - I won't disagree with you regarding the intent of the legislation being mandatory division, but the current situation is that the only way that the Minister is being informed, is the submission of an "application" by one of the parties. That makes it optional if the parties don't want a credit split, with or without an actual agreement not to divide the CPP credits.

By the way, I do provide a service to lawyers where I calculate the effects of a CPP credit split in advance, but I would give up that service line in a second, if the government would solve the current situation whereby approx one-half of the credit splits being done result in a net loss of benefits to the "couple", due to overlap with the child-rearing provision. Based on my calculations, the average loss is $100 monthly, indexed, for life.


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## OhGreatGuru (May 24, 2009)

Are you suggesting CPP should not be informed of a divorce decree? That could pose all kinds of future complications regarding pension entitlements. And the wording of s.55.2(3) implies that some provincial laws may require CPP division.

PS. From this and other posts I think your real concern is how the child-bearing years dropout can lead to what may be considered an inequitable division of benefits. But keeping CPP in the dark about marital status is not the solution.


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## Dogger1953 (Dec 14, 2012)

OhGreatGuru said:


> Are you suggesting CPP should not be informed of a divorce decree? That could pose all kinds of future complications regarding pension entitlements. And the wording of s.55.2(3) implies that some provincial laws may require CPP division.
> 
> PS. From this and other posts I think your real concern is how the child-bearing years dropout can lead to what may be considered an inequitable division of benefits. But keeping CPP in the dark about marital status is not the solution.


OGG - You're right that my biggest concern is the inequitable division that results when the credit split overlaps with the child-rearing provision. If the government would amend the credit-splitting legislation to make it an equal division of all CPP "assets", I wouldn't be concerned if they truly made the credit split mandatory. But the current credit split isn't equal in 50% of the cases (when children are involved), and the credit split isn't truly mandatory under the current legislation. That's the message that I'm trying to convey.


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