Your Pension

When your marriage breaks down you will have to deal with sharing property. If you or your spouse have a pension, this may well be the most valuable asset to deal with and also the most complicated and difficult to value. Your most important consideration in this respect is to work with a lawyer and a qualified pension valuator in order to ensure that the pension is valued properly. Any attempt to hide or undervalue your pension will probably be caught by your spouse's lawyer. If you try to proceed with anything other than a properly prepared pension valuation report, it could delay the whole process and cost you more money in the long run. A proper pension valuation report could save you many times the cost of having it prepared.

The law requires that you and your spouse each prepare a list of your assets and liabilities. You must each include in this list the value of any pension that has been established for you by your employer. Do not attempt to deal with the pension separately from the other assets. It is extremely important that proper procedures be followed. You could lose thousands of dollars if they are not.

When the assets and liabilities for each of you have been established, it is then possible to determine which party has the higher value of net assets acquired during the marriage. That party must then transfer sufficient assets to the other, so that both parties have assets of equal value. It is important that this equalization calculation be prepared properly.

Your pension or your spouse's pension may be the most valuable asset of all. We have seen many case where the pension was not valued properly, and therefore, one of the parties lost thousands of dollars in the equalization of the assets.

You will want to ensure that your pension is valued as low as you can legally justify, and still be reasonable. You will accomplish this by obtaining a proper valuation report. Some people suggest that you avoid the cost of having a valuation report prepared by obtaining a letter from your employer stating the value of your pension. This will only delay the process of settling your divorce and could cost you far more money in the long run. Have your lawyer work with a qualified pension valuator. Together they will do the best job for you. Working together, they should be able to settle the value of the pension without going through the expensive process of a Court case. This could save you many thousands of dollars.

The retirement age that is assumed when your pension is valued is important. The later you retire, the less money you will collect from your pension, and therefore, the lower the value it will have. You must produce every possible proof that you can't retire early and that you will work as long as possible. The following are some of the considerations:

It may be that your pension plan does not require mandatory retirement at age 65. You could argue that you intend to retire at an age beyond 65.
There are many court cases where it was decided that assuming early retirement was not proper. Your lawyer will research these for you.

You may be able to prove that you cannot afford to retire early because of support payments that you must make and the costs you must incur in setting up your living accommodations.
You may be able to show that because of your marriage breakdown and your age, there will not be sufficient years for you to accumulate enough assets to be able to retire early.
The amount of the payments that you will receive from your pension on retirement may be too small for you to live on until you qualify for Government pensions.
If you love your work, and are a workaholic, explain that psychologically you will be unable to retire early.
Something might happen before you reach the early retirement age or comply with early retirement conditions. You might change jobs, you might die or the company may cease business.
If you are in good health, you may be more inclined to work to a later age.
If you are re-marrying a younger person, you may be inclined to work until your new spouse is eligible for retirement.
If you do not have a hobby or other interests, you can point out that retirement is not attractive to you, as you would have nothing to do with your time. You should also point out that many people have found that retirement is so unpleasant and stressful, that they die shortly after retiring.

Income tax allowance is another important consideration in the valuation of your pension. If you can show that you will have other income after you retire, this will increase the income tax allowance and reduce the value of your pension.

Your life expectancy is an important consideration in valuing your pension. If you have health problems, or a history of health problems in your family, this could indicate a shorter life expectancy for you, which would produce a lower value for your pension. It has even been proven that working different shifts can shorten your life. Get a letter from your doctor if your life expectancy is shorter than normal. This could reduce the value of your pension considerably.

Some pension plans make provision for special allowances to be paid regardless of age at retirement, provided that a certain number of years of service have been achieved. There is generally a rider attached to this provision that reduces the amount of the special allowance in the event you earn employment income after retirement. If your pension has this provision, you should argue that if you do retire early, you will be earning employment income, and therefore, will not qualify for the special allowance.

If early retirement is being considered in the valuation of your pension, you should insist that a service discount be provided for the many possible reasons why you may not retire early. This could reduce the value of your pension considerably and save you thousands of dollars.

In order to assist having your pension valued properly, you should provide your lawyer with everything possible that you have in connection with your pension. This would include a booklet from your employer explaining your pension and copies of your pension statements that you have received. In addition, you should sign a letter authorizing your employer and pension administrator to provide information to your pension valuator.

If you do have to transfer some assets to your spouse to satisfy the equalization amount, you should consider doing this by a tax-free rollover of some of your RRSP funds into an RRSP for your spouse.