What’s mine is yours, and what’s yours is mine. This includes Canada Pension Plan (CPP) contributions made while a couple was married or in a common-law union. These contributions can be equally divided during or after a divorce or separation. The process of this is called credit splitting and was implemented as of January 1, 1978. Credits can be divided even though one spouse did not contribute to CPP during the period in which the couple was married or common-law. If you never contributed to CPP, credit splitting may help you qualify for CPP benefits. By credit splitting, the amount of your, and your former spouse or common-law partner’s, current or future benefits may be affected.
How do you qualify?
There are various factors that determine your credit splitting eligibility, such as whether you are divorced or separated, or whether you were married or common-law. We will go into the eligibility factors relating to each of these below:
Marriage ended in divorce or annulment
If you were married and it ended in divorce or annulment, how you qualify depends on when you divorced or had your marriage annulled.
If you were married and it ended by divorce or annulment after January 1, 1987, you could qualify to split credits if you lived with your past spouse for 12 or more continuous months, and your past spouse provides a notification and the required information to Service Canada. It’s important to note that there is no time limit on this last part, as long as the notification and information is provided.
If you were married and it ended by divorce or annulment from January 1, 1978 to December 31, 1986, you must have lived with your past spouse for 36 or more continuous months, and your past spouse provided notification in writing and the required documents within 36 months of your marriage ending. If the 36-month time limit is not met, pension credits can still be split so long as your past spouse is alive and provides confirmation in writing to waive this time limit. Lastly, in order to qualify, your divorce or annulment must be recognized by Canadian law.
If you were married and it ended by divorce or annulment prior to January 1, 1978, you cannot qualify for a credit split. This is because the CPP credit split program was not in existence before that date.
Marriage ended in separation
If you are married and have separated from your spouse, but have not officially divorced or had the marriage annulled, you might still qualify for a pension split. The criteria for this is as follows: the separation took place January 1, 1987 or later, you and your spouse lived together for at least 12 continuous months, you and your spouse have been living apart for at least 12 continuous months, and either you or your spouse notifies Service Canada in writing with the required documents. There is no time limit on this, unless your spouse has passed away. If that is the case, you are required to apply within 36 months of your spouse’s date of death.
Common-law partnership ended
Before January 1, 1987, common-law unions were not recognized for credit splitting purposes. If you and your common-law partner’s union ended January 1, 1987 or later, there are three criteria that need to be met. The first is you must have lived for 12 continuous months with your past common-law partner. Secondly, you must be living apart for at least 12 consecutive months (unless your past common-law partner passes away). Third, one of you must apply to Service Canada in writing, along with the required information, within 48 months of the day you started living apart (unless your past common-law partner is alive and writes to waive this time limit).
How does it work?
We can use Bill and Margaret as an illustration and follow their relationship over a 15-year period. Below we list the events that occurred during that period, followed by a chart to illustrate credit splitting.
Year 1: Bill and Margaret begin their relationship, but are living apart. As they are not considered common-law, that year’s earnings are not eligible for credit splitting.
Year 2: Bill and Margaret begin living together. As they are now considered common-law, that year’s earnings are eligible for credit splitting.
Year 4: Bill and Margaret marry. There is no change to the eligibility or past eligibility of credit years.
Year 5: Margaret leaves the work force to attend university. Margaret worked a portion of the year, and although she does not have any earnings the next three and a half years, these years are still eligible for credit splitting as her and Bill are married.
Year 9: Margaret goes back to work.
Year 10: Bill loses his job. Similar to when Margaret went back to school, even though Bill does not have any earnings for almost two years, as they are married, any earnings by either Margaret or Bill are eligible for credit splitting.
Year 12: Bill finds new employment.
Year 14: Bill and Margaret divorce in November of year 14. This year is excluded from the calculation. Even though Bill and Margaret were together for almost the entire year, the final calendar year a couple is together is excluded from the division. In other words, the division of credits ends the December of the year before you separate, divorce, or annul.
Year 15: Bill and Margaret file to split their CPP pension credits earned during their years together. This split is a permanent change to their CPP record of earnings. The CPP that they are then eligible for in the future will be based off their respective earnings after credit division, as shown in the two most-right-hand columns below.
| Year | Bill’s earnings | Margaret’s earnings | Total yearly earnings | Year eligible for credit splitting? | Bill’s earnings after credit division | Margaret’s earnings after credit division |
| 1 | $35,000 | $20,000 | $55,000 | No | $35,000 | $20,000 |
| 2 | $35,000 | $20,000 | $55,000 | Yes | $27,500 | $27,500 |
| 3 | $37,500 | $20,000 | $57,500 | Yes | $28,750 | $28,750 |
| 4 | $37,500 | $20,000 | $57,500 | Yes | $28,750 | $28,750 |
| 5 | $40,000 | $14,000 | $54,000 | Yes | $27,000 | $27,000 |
| 6 | $40,000 | $0 | $40,000 | Yes | $20,000 | $20,000 |
| 7 | $42,500 | $0 | $42,500 | Yes | $21,250 | $21,250 |
| 8 | $42,500 | $0 | $42,500 | Yes | $21,250 | $21,250 |
| 9 | $42,500 | $40,000 | $82,500 | Yes | $41,250 | $41,250 |
| 10 | $20,000 | $52,000 | $72,000 | Yes | $36,000 | $36,000 |
| 11 | $0 | $52,000 | $52,000 | Yes | $26,000 | $26,000 |
| 12 | $25,000 | $55,000 | $80,000 | Yes | $40,000 | $40,000 |
| 13 | $50,000 | $55,000 | $105,000 | Yes | $52,500 | $52,500 |
| 14 | $50,000 | $60,000 | $110,000 | No | $50,000 | $60,000 |
| 15 | $52,500 | $60,000 | $112,500 | No | $52,500 | $60,000 |
Had Bill or Margaret exceeded the yearly maximum pensionable earnings (YMPE) in any of the above years, the YMPE would be the maximum earnings for purposes of credit splitting that could be split.
How do you apply?
The credit split can only occur after you and your former spouse are divorced, have had your marriage annulled, or are separated for at least 12 months. In the case of common-law partners, you must be separated for at least 12 months.
Either you, or your past spouse or common-law partner, can initiate the request to split CPP. This can be done through an electronic or paper application. The electronic application is completed online through your My Service Canada Account (MSCA) by completing the CPP Credit Split form. With this option, you must provide original or certified true copies of the required documentation to Service Canada either by mail or in person at your local Service Canada office. For paper applications, you must complete form ISP1901 CPP Credit Split, and provide original or certified true copies of the required documentation to Service Canada either by mail or in person at your local Service Canada office.
Once you have applied, Service Canada reviews the application and accompanying information. After the review is completed, both you and your former spouse or common-law partner receive a decision letter.
What additional information is required?
In addition to the online CPP Credit Split form, or the in person form ISP1901 CPP Credit Split, there are some documents and information you must provide as follows:
When is a credit split not allowed?
There are a few instances where a credit split may not be allowed, or where a portion of time may be excluded. These instances are as follows:
There are numerous components and things to look at when going through a separation. CPP splitting is one of the more straightforward pieces. We recommend meeting with your Portfolio Manager to obtain a more comprehensive checklist of other items needed and to consider. Speak to your professional tax advisor about your particular facts and circumstances when evaluating and before implementing any tax planning strategies.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week in the TC. Call 250.389.2138, email greenard.group@scotiawealth.com, or visit greenardgroup.com.
This publication has been prepared by The Bank of Nova Scotia for Scotia Wealth Management clients. It is for general information purposes only and should not be considered or relied upon as personal and/or specific financial, tax, pension, insurance, legal or investment advice. We are not tax or legal advisors, and we recommend that individuals consult with their qualified advisors, including tax and legal advisors, before taking any action based upon the information contained in this publication. The opinions and projections contained in this publication are our own as of the date hereof and are subject to change without notice. Scotia Wealth Management is under no obligation to update this commentary, and readers should assume the information contained herein will not be updated. While care and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither The Bank of Nova Scotia nor any of its affiliates or any of their respective directors, officers or employees make any representations or warranties, express or implied, as to the accuracy or completeness of such material and disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This commentary may contain forward-looking statements based on current expectations and projections about future general economic factors. Forward-looking statements are subject to inherent risks and uncertainties which may be unforeseeable and such expectations and projections may be incorrect in the future. Forward-looking statements are not guarantees of future performance and you should avoid placing undue reliance upon them. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication may not be reproduced in whole or in part without the prior express consent of The Bank of Nova Scotia.