Ending a relationship – and what it means for your pension
If you and your spouse separate or divorce, you'll need to decide how to divide your shared family assets, including your pension.
Under BC law, a pension is shared family property, just like a house, car or bank account. Whether you and your former spouse are members of BC’s Teachers’ Pension Plan or members of different pension plans, the value of your respective pensions will be treated just like any other family property. The bottom line? If your spousal relationship ends, your former spouse may be entitled to an equal share of the pension you earned while in the relationship.
Dividing financial assets is complicated, and there are many complex decisions to make. It's wise to have an independent professional, such as a lawyer, help you and your former spouse decide what options to consider and how best to divide your family's financial assets.
Your lawyer might want to become familiar with Pensions and marital breakdowns: information for lawyers, on the plan website.
In this article, we've assumed you and your former spouse have agreed to divide your pension benefit. Here's what that might mean for both of you.
If you separate before you start receiving your pension
Your former spouse can receive their share of your pension the month after you reach your earliest retirement age. Or, if you leave your job with a plan employer and leave the plan at that time, your former spouse can receive their share then. They may be able to choose how they want to receive their share – as a locked-in lump-sum transfer payment to a registered retirement plan (such as an RRSP) or as a lifetime monthly pension.
The Family Law Act clarifies division of assets when relationships break down. Under the act, common-law spouses are treated the same as married spouses when dividing a pension. This means common-law spouses have the same rights and responsibilities as married spouses regarding pension benefit entitlements.
When you inform us of your separation or divorce, we'll send a letter to your former spouse inviting them to become a limited member of the plan, which allows the plan to divide the pension before it is paid out. If your former spouse chooses to become a limited member, we'll pay their portion of your pension directly to them and adjust your pension payments (whether lump sum or monthly) to reflect that arrangement. Your monthly pension payment will be less than it would be if you were still in the spousal relationship.
(If your former spouse does not become a limited member, we'll pay your full pension directly to you, and you'll be responsible for making sure your former spouse receives their share each month.)
If you die before you start receiving your pension, your former spouse will receive their proportionate share according to the directions in your complete, signed separation agreement or registered court order.
If your former spouse dies before they start receiving their share of your pension, we will pay their share to their estate or beneficiary. This only applies if they are a limited member of the plan and have not yet started receiving their share of your pension, or if their estate or beneficiary(ies) becomes a limited member.
Some specific examples
Below are some specific examples of a plan member going through a separation and divorce and how it affects their pension. They are for information only and are not intended to be advice. Your own circumstances will be different.
Example: a significant age difference between divorcing spouses
What happens in a divorce when the plan member is significantly older than their spouse?
Jack is 50 and became a plan member 20 years ago, long before he met Annie. Annie is 40 and works as an accountant. They’ve been married six years and are getting a divorce.
After their separation, Annie applies to become a limited member. This means that once the divorce is complete, and as soon as Jack turns 55 (when Annie is 45), she will be entitled to a portion of the pension Jack earned during their six years of marriage. She is not entitled to any part of Jack’s pension from before they were married or after they are divorced.
Assuming Jack and Annie decide to split Jack’s pension equally, Jack’s share of the six years will be three years of pensionable service, and Annie’s limited member share will also be three years of pensionable service.
In this example, if Annie was the plan member and Jack the limited member, Jack would have to wait until Annie turned 55 (when Jack is 65) to be entitled to his portion of the pension Annie earned during their marriage.
Example: two plan members divorcing
Casey and Jordan have been married 20 years and are now getting a divorce. Casey has been a plan member for all 20 of those years, but Jordan has been a plan member for only 14 of those years.
If Casey and Jordan both decide to become limited members to the other’s pension, and assuming they decide to split their pensions equally, when each turns 55 the other will be entitled to a portion of the pension their spouse earned during their marriage:
- Casey will be entitled to a benefit based on 7 years of Jordan’s service (half of 14)
- Jordan will be entitled to a benefit based on 10 years of Casey’s service (half of 20)
If Casey and Jordan had both been plan members for the entire 20-year duration of their marriage, they would each be entitled to a benefit based on 10 years of the other’s service (half of 20). Though Casey’s and Jordan’s service may be identical, their salaries, and therefore pension entitlement, might not be, so it makes sense they each become a limited member to the other’s pension.
If you separate after you start collecting your pension
If you separate after you start collecting your pension, you can't choose a different pension option, and neither can your former spouse. The only issue that needs to be settled is how your former spouse’s pension will be paid (either directly from you or through the plan). Whatever pension option you chose when you retired will also apply to your former spouse. For example, if you chose a joint life pension with a 10-year guarantee, your former spouse will receive their share of this same pension option.
Your former spouse may want their share of the pension paid directly into their bank account each month. They can arrange this by applying to become a limited member of the plan.
If you die, your former spouse may continue to be paid their share of the pension, depending on the pension option you chose at retirement.
If you and your former spouse separate after your retirement and your former spouse becomes a limited member, you will receive their remaining share of your pension upon their death; it will not go to your former spouse’s beneficiary or estate.
If you are considering a new spousal relationship after retirement, be aware that the pension option you chose at retirement only applies to you and your former spouse. Your new spouse is not eligible for a benefit unless your former spouse waived their beneficiary rights when you started to receive your pension.
What you need to do
As you can see, dividing a pension is complicated: there are many issues to consider and decisions to make.
Explore the resources on this site to learn more about what's involved and the actions you need to take. This could include:
- Giving us permission to share information about your pension with a third party, such as a lawyer
- Letting us know how to divide the pension by sending us a complete, signed separation agreement; registered court order; or Form P9 Agreement to have benefits divided under part 6
- Having your former spouse apply to become a limited plan member
- Having both you and your former spouse update your beneficiary information
- Updating your names and contact information if they have changed as a result of the separation
If you still need assistance, you can always get in touch with us directly; our team is available to help.
"If your spousal relationship ends, your former spouse may be entitled to an equal share of the pension you earned while in the relationship."
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