Can pensions and RRSPs be divided?

Generally they can be divided as per the s. 4(1) definition of property which states that it consists of any interest (contingent or vested, future or present) in real and personal property. However, if you look at the exclusions listed in s. 4(2) you will notice that paragraph 7 states that unadjusted pensionable earnings under the Canada Pension Plan (CPP) cannot be divided. Therefore, if the pension you are seeking to include in the equalization payment is in fact a CPP then it will not be divided but any other interest in a pension will be. You should be aware of the fact that the aforementioned provides the current state of the law, however, there are amendments to the Family Law Act which are pending and, when they come into force, will apply retroactively to any applications not yet finalized. One amendment made can be found under the s. 4(1)(c) definition of property:

(c) in the case of a spouse’s rights under a pension plan, the imputed value, for family law purposes, of the spouse’s interest in the plan, as determined in accordance with section 10.1, for the period beginning with the date of the marriage and ending on the valuation date;

Section 10.1 further amends the Act with regards to an interest in a pension plan. According to subsection (3):

an order made by the court under s.9 or s.10 may provide for the immediate transfer of a lump sum out of a pension plan but, except as permitted under subsection (5) not for any other division of a spouse’s interest in the plan.

Therefore, this section grants the court the discretion to decide whether a pension should be included in net family property calculations (NFP) or whether it should be taken out of the NFP and instead divided independently. In order to make these determinations the courts must consider the 5-prong test enunciated in subsection (4) as well as all relevant circumstances and the conditions of both spouses. Interest in a pension plan Imputed value for family law purposes 10.1 (1) The imputed value, for family law purposes, of a spouse’s interest in a pension plan to which the Pension Benefits Act applies is determined in accordance with section 67.2 of that Act. Same (2) The imputed value, for family law purposes, of a spouse’s interest in any other pension plan is determined, where reasonably possible, in accordance with section 67.2 of the Pension Benefits Act with necessary modifications. Order for immediate transfer of a lump sum (3) An order made under section 9 or 10 may provide for the immediate transfer of a lump sum out of a pension plan but, except as permitted under subsection (5), not for any other division of a spouse’s interest in the plan. Same (4) In determining whether to order the immediate transfer of a lump sum out of a pension plan and in determining the amount to be transferred, the court may consider the following matters and such other matters as the court considers appropriate:

1. The nature of the assets available to each spouse at the time of the hearing.
2. The proportion of a spouse’s net family property that consists of the imputed value, for family law purposes, of his or her interest in the pension plan.
3. The liquidity of the lump sum in the hands of the spouse to whom it would be transferred.
4. Any contingent tax liabilities in respect of the lump sum that would be transferred.
5. The resources available to each spouse to meet his or her needs in retirement and the desirability of maintaining those resources.