Pension Division is a fact that spouses most often have to face if they separate.
Although the number of people who hold a work place pension is dwindling in Canada and other places, for those who have it, a workplace pension is a great benefit.
At Hemminger Law Group we have a lot of clients who have the benefit of a workplace pension. Such clients may work for the British Columbia Provincial Government or the Department of National Defence, where the Pension Division Benefits Act regulates pension division. Others are nurses or teachers.
Such pensions are really important to people because they represent a source (and for some, almost the only) of future income for retirement. For many people, having a pension is also a symbol of the work and dedication they have put into their jobs.
There are two significant things that our clients may not know about their workplace pension. One part of it is good news, and one part of it, is not so good news.
So, let us start with the good news. Your pension is worth way more than you think it is. People often look at their pay stubs and see a notation of their pension contributions. The thing is, that number, is only their pension contributions and should not be confused with pension value. Pension contributions relate to the amount that has been deducted from the person’s pay to put into the pension fund. It is not an indication of value. Typically, the actual value of the pension tends to be way greater (in multiples even) than what is set out as their pension contributions.
The best thing to do in order to find out the actual value of the pension is to hire an actuary (or economist). Due to compound interest and the combination of employee and employer contributions, the ultimate value of a pension is significantly higher than most people realize. In some cases, a pension will be the most valuable family asset to be divided between separating spouses.
This brings us to the second point a lot of people do not
realize about their pensions. Pensions are a family asset. This means that if
you have a pension and you are separating from your spouse, that the law says
that pension must be divided with your spouse. During the time that spouses are
together each person becomes entitled to a portion of the pension regardless of
who is directly earning the pension at their employment.
Basically, any pension credits earned during the time the parties resided together in a marriage-like relationship will be divided with their spouse.
The challenging thing for the person who is the person who actually earned the pension credits is that they are often quite upset to learn that they have to split that pension with their spouse. For many separating spouses, it is hard for them to get their head around this difficult fact.
When it comes to the mechanics of actually dividing the pension, most pension plans are well-equipped and the administrators of the plan can simply divide the pension (so that each person will ultimately get their portion) once presented with a court order or separation agreement.
Call us if you have a question about pension division. It is important to have the right legal advice when dealing with this significantly important and valuable asset.
Contact us at Hemminger Law Group for advice about pension division.
This article is written by Jim Monier-Williams, lawyer.