How to avoid splitting CPP credits

Q: Many years after my marriage failed, my spouse and I finalized our divorce, but we remained on good terms. Can we choose not to split the CPP credits? If so, what do I need to do to make this happen?

—Kate Thorburn, Vancouver

A: Here is one case where doing nothing will get you what you want. (If only this happened when it came to six-pack abs!) What I mean is that unless you file an application with Service Canada, you will not be splitting the CPP credits.

Many soon-to-be-former couples want to split the CPP credits and do the paperwork as a part of their separation. It can make a big financial difference if one spouse was out of the workforce for an extended period. The rules are complex and include some limitations so check out the Service Canada website for details.

If you really are sure that not splitting CPP is the best path for both of you, you have saved yourself some work. But you should go back and check your separation agreement, just in case it mentioned anything about CPP, says Rona Birenbaum, a CFP with Toronto-based Caring for Clients. “If the separation agreement obligated you to split pension credits, there is always the risk that one of you will have a change of heart and apply for retroactive compensation. Obtain legal counsel, then get any agreement that is outside of what the separation agreement dictated, in writing.”

Your marriage ended many years ago, but other readers should note that there is a 36-month time limit after the end of your marriage to apply to split your pension credits. If you miss that deadline you can only do it if your former spouse is still alive and signs a written agreement to waive the condition. Here’s where it gets confusing. This 36-month deadline only applies if you were divorced prior to January 1, 1987. If you were legally divorced anytime after this date, the deadline to apply for credit splitting doesn’t apply, unless, your spouse dies, then you are once again bound by that 36-month deadline.

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Correction: We updated the original answer to the reader’s question as of September 28, 2016.  In the original copy it was incorrectly stated that the 36-month deadline imposed on credit splitting applications applied to everyone, regardless of when they obtained their legal divorce. This wasn’t accurate. 

About Bruce Sellery

Bruce Sellery is the CEO of Credit Canada, the country’s longest-standing non-profit credit counselling agency. He is a former MoneySense columnist.