Discover How You Can Share Your Canadian Pension Plan (CPP) with Your Spouse or Your Legal Partner in Six Simple Steps
Married or common-law couples in an ongoing relationship may voluntarily share their CPP retirement pensions to help reduce their tax bill. Currently, the government allows you to share your CPP if you meet certain conditions. We will outline the six steps in order to participate in pension sharing.
Why Consider Pension Sharing?
In addition to allowing your spouse or common-law partner to share in your pension benefits, you can also realize certain tax savings. Pension sharing really only produces a tax savings if one spouse is receiving more CPP and is in a higher tax bracket than the other spouse. Be sure to consult your tax accountant or financial advisor to learn more about the benefits of pension sharing.
The Six Steps to Pension Sharing
Below are the six steps you can take to set up pension sharing for your CPP. Be sure to follow each step:
Step 1: Find Out if You Qualify for Pension Sharing
In order to qualify for pension sharing, you have to make sure that you meet the following conditions:
- You are currently living with your legal spouse or common-law partner AND
- Either you or your legal spouse or common-law partner is currently receiving, or have applied for, a retirement pension
- You must have lived with your spouse during the time you, your spouse or both of you contributed to CPP
Common-Law Partner Definition
The current definition of a common-law partner is someone whom you share a living space with and have had a conjugal relationship for at least 1 year. A common-law partner can be either someone of the same sex or the opposite sex as you.
To establish your common-law partner for the CPP pension sharing program, you will need to complete the following forms:
- the Statutory Declaration of Common-law Union form – dual signatures (ISP 3004 CPP), or
- the Statutory Declaration of Common-law Union form – single signature (ISP 3104 CPP)
What about Spouses or Common-Law Partners Who are Separated?
You will not be able to apply for pension sharing if you and your spouse or common-law partner have been voluntarily separated at the time of application.
If you happen to become separated after pension sharing approval, then the following will apply:
- The pension-sharing benefit will cease the 12th month following the month in which the spouses or common-law partners start to live separately and apart.
- If the pension sharing involves both CPP and Quebec Pension Plan (QPP) retirement pensions, the pension sharing ceases the earliest of one of the following conditions:
- The month in which there is a legal separation
- The 12th month after both parties began to live separately
Step 2: How Much Could You Receive?
You can share your pension in one of two ways:
- If only one of you contributed to the CPP or QPP, then you will both receive one pension
- If both of you contributed to the CPP or QPP, then you will both receive a share of both pensions
The amount that you will be able to share will depend on how long you have been cohabitating with your spouse or your common-law partner. To learn more about your
current pension status and benefit amount, visit the Statement of Contributions where you can view your account.
- Any and all CPP post-retirement benefits cannot be considered for pension sharing
- Pension sharing and the Canada Revenue Agency’s pension income splitting are entirely different programs
- To learn more about pension sharing for QPP, view the Retraite Québec website
Step 3: When to Apply for Pension Sharing
The pension-sharing plan will start as soon as your application is approved. Please note that a pension-sharing arrangement cannot be backdated.
Step 4: Who Should Complete the Pension-Sharing Application
Any single party can apply for the pension sharing application. That can be you or your spouse or common-law partner. All names on the application will be eligible for pension sharing if the application is approved.
Step 5: Apply for Pension Sharing
You can apply for pension sharing if you are applying for or are already receiving a CPP retirement pension.
There is a two-step process when applying online:
- Log into your My Service Canada Account (MSCA). Once you have logged in, complete the online CPP Pension Sharing form
- Mail certified true copies of the required documentation or drop them off at a Service Canada office
Apply Using a Paper Application
It is recommended that you apply online for faster processing. However, you can also apply using a paper form:
- Complete the Application for CPP Pension Sharing of Retirement Pension(s) (ISP1002),
- include certified true copies of the required documentation, and
- mail the form or drop it off at a Service Canada office
Step 6: After You Apply
You will be contacted after your application has been received. You will also receive a notice when your application is either accepted or rejected.
When Does Pension Sharing Stop?
Pension sharing stops in whichever month occurs first:
- If you or your spouse or common-law partner cancel pension sharing, then the plan will stop the next month
- The month you divorce or the 12th month after you and your spouse separate
- The month the spouse or common-law partner doesn’t pay into the CPP (or QPP)
- The month one of you dies
How to Cancel Pension Sharing
To cancel a pension-sharing arrangement:
- Complete the Cancellation of Pension Sharing form (ISP1014)
- Print and sign the form
- Mail it to the Service Canada Office or drop it off at your nearest Service Office Canada location
How to Review Your Application Status
You can contact the Canada Pension Plan to review the status of your pension-sharing application.
What if You Disagree With a Decision?
You may request a reconsideration of any decision. During the reconsideration phase, your application will be reviewed.
This material has been prepared for informational purposes only and should not be considered personal investment advice or solicitation to buy or sell any securities. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice either. Every effort has been made to compile it from reliable sources, however, no warranty can be made as to its accuracy or completeness. Investors should seek appropriate professional advice before acting on any of the information here. The views expressed here are those of the author and writer only and not necessarily those of Worldsource Securities Inc., its employees or affiliates. Worldsource Securities Inc., is the sponsoring investment dealer and the member of Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.
About the Author
Jordan Schaffran is a Wealth Advisor at Silver Cedar Wealth Management, helping dentists achieve important financial milestones. He provides independent, forward- thinking advice that aligns with clients’ objectives and offers a holistic approach to their wealth management needs. To contact Jordan and discuss your wealth management goals, email firstname.lastname@example.org. Website: www.silvercedarwealth.com.