When going through a divorce or separation in Ontario, many people wonder how pensions are treated in the division of assets. Under the Family Law Act (FLA), a spouse’s interest in a pension plan is considered property and must be included in the Net Family Property (NFP) calculation.
Can a Pension Be Excluded from Net Family Property?
There are specific circumstances where a pension may be excluded from a spouse’s NFP calculation. According to sections 10.1(3), (4), and (5) of the FLA, courts have discretion in handling pension division separately from NFP calculations. Some options include:
- Lump-sum transfers from the pension plan
- Dividing periodic pension payments if the pension is already in pay
Why Are Pensions Unique in Property Division?
Pensions are often viewed as complex assets in equalization calculations because they represent a future stream of income rather than a liquid asset. Recognizing this challenge, Ontario introduced a new pension valuation system in 2009. Under this system, Ontario-regulated pension values are determined by pension administrators using a specific formula outlined in the Pension Benefits Act (PBA) and the FLA.
What About Survivor’s Benefit Pensions?
A survivor’s benefit pension is a pension in its own right. It represents an expected income stream that can be actuarially valued, similar to an employee’s pension entitlement before retirement. Because of this, a survivor’s benefit pension qualifies as property under the FLA and, in most cases, must be included in the NFP calculation.
Although there is no court ruling explicitly stating that a survivor’s benefit pension cannot be excluded from NFP calculations, courts have consistently included survivor benefits in NFP calculations whenever they have been assigned value.
Key Takeaways for Separating Spouses
- Pensions are considered property under the FLA and typically factor into NFP calculations.
- In certain cases, pension interests can be handled separately, such as through lump-sum transfers or periodic division.
- Survivor’s benefit pensions are generally included in NFP calculations, though no case law explicitly mandates their exclusion.
If you are dealing with pension division during separation or divorce, it’s important to seek legal advice from a family lawyer who understands the complexities of Ontario pension laws. Contact our office today to discuss your case and ensure your financial future is protected.
DISCLAIMER:
The information provided in this blog is for general informational purposes only and does not constitute legal advice. No attorney-client relationship is established through this writing. You should consult with a qualified attorney for advice tailored to your specific situation. The lawyer and their firm disclaim any liability arising from reliance on this blog or any other content on this website.