Canada Pension Plan Credits – What are they and how do you split them on divorce/separation?
The Canada Pension Plan (CPP) is a national scheme which funds retirement pensions, and disability benefits for all working Canadians over 18. If you are employed or self-employed, over the age of 18, and making more than $3,500 annually, then you must contribute to the CPP. Once you reach the age of 70, contribution ends and you will be eligible to receive CPP payments.
How do I contribute?
If you are employed, then half of your contributions are deducted from your paycheck each pay period. The other half of your contributions comes from your employer
If you are self-employed, you must contribute the entire required amount
The greater your employment income, the greater your contributions and monthly pension amount when the contribution period ends
How are contributions calculated?
Contributions are based on your employment income, up to a maximum contribution amount
The maximum contribution amount is recalculated by the CRA every year
What if I am retired/taking a leave for medical or family reasons?
The CPP contribution period is from ages 18 to 70
Periods where you are not working for family or child rearing reasons are taken into consideration for contributions and benefit payments
CPP credit splitting
On separation, you can divide the CPP contributions you and a spouse or common law partner accumulated while married or cohabiting. CPP credits are considered to be divisible property in a divorce/separation.
Who is eligible for Credit Splitting?
Parties who separated on or after January 1, 1987
Parties who have lived together for 12 consecutive months and have now divorced or who have lived apart for 12 consecutive months
What disqualifies a person from Credit Splitting?
Persons whose total pensionable earnings together are not more than double the tax year’s basic exemption are not eligible for credit splitting.
Persons who were married or cohabiting before 18 and/or after 70 cannot spilt the credits for those periods, as no contributions were made at those times.
Parties who were considered disabled for the purpose of CPP of Quebec Pension Plan (QPP) qualification are not eligible for splitting
Parties who were a beneficiary under a retirement pension from the CPP or QPP are not eligible.
How do I apply for Credit Splitting?
Notify Service Canada of your desire to split credits; or
Request the split with CPP credit split form (ISP1901)
My former spouse requested credit splitting, but I don’t agree. What can I do?
Spouses or former partners can challenge the request of one party for credit splitting
If you receive notice of the splitting and you would like to challenge, contact Service Canada