Pension Plans and Divorce: Key Considerations for Protecting Your RetirementFamily Mediation Center
Pension Plans
Pension Plans
Separation or divorce and implications in PENSION PLANS;
Under the BC Family Law Act, pension plan benefits are considered family property, same as a house or a car ,is not excluded, unless the couple decide to exclude this asset., in other words,you and your spouse are each entitled to a share of the pension benefits accumulated during your time together, unless you wish differently.
Before agreeing on any division, it’s crucial to understand the type of pension plan you own. .IF you do not know, Contact the plan administrator for detailed information about the plan before our mediation session.
Division of Pension Benefits
in general, the portion of pension benefits divided between spouses is based on:
- The start of your common-law relationship,
- The date of marriage
- The date of separation.
It is different if you where togeter for one year of 20 years, each case is different. if you were together for a long period and nearing retirement, you might choose to divide all the benefits. In my experience, majority if the couples that come to mediation, wants to keep the pension plan separated.
Types of Pension Plans
Defined Contribution Plans: Benefits come from investment returns. You can typically:
- Buy an annuity,
- Keep the funds in the account and withdraw as needed, or transfer the funds to a registered plan.
Defined Benefit Plans: These provide a fixed, regular payment upon retirement. The division depends on the plan’s rules and when benefits start being paid
with a defined contribution plan, you, the employee, have investment decisions to make. This freedom of choice is not available with defined benefit plans.
Types of Pension Plans
Defined Contribution Plans: Benefits come from investment returns. You can typically:
- Buy an annuity,
- Keep the funds in the account and withdraw as needed, or transfer the funds to a registered plan.
Defined Benefit Plans: These provide a fixed, regular payment upon retirement. The division depends on the plan’s rules and when benefits start being paid
with a defined contribution plan, you, the employee, have investment decisions to make. This freedom of choice is not available with defined benefit plans.
Receiving Pension Payments
If pension payments have already started, the non-member spouse is entitled to a share of these payments. Consider:
- Adjustments for any previous payments made before sorting out the division.
- Whether child or spousal support affects the pension share.
- The tax implications, as pension payments are taxable. You may be taxed separately on your respective shares.
Limited Members
If the pension plan member’s ex-spouse becomes a “limited member,” they can receive a share of the pension benefits either as:
- A single payment transfer to another plan,
- A separate lifetime pension.
This typically happens when the pension member becomes eligible to collect their pension, often starting at age 55, or earlier for certain professions.
Both Spouses Have Pension Benefits
If both spouses have pension benefits, you might opt to divide only the difference between the two plans (a method known as setting off an entitlement). This approach allows for:
- More flexibility in retirement planning,
- Potentially better protection of the overall value of the benefits.
A lot of time, we include the service of an actuary to provide us options.
Receiving Pension Payments
If pension payments have already started, the non-member spouse is entitled to a share of these payments. Consider:
- Adjustments for any previous payments made before sorting out the division.
- Whether child or spousal support affects the pension share.
- The tax implications, as pension payments are taxable. You may be taxed separately on your respective shares.
Limited Members
If the pension plan member’s ex-spouse becomes a “limited member,” they can receive a share of the pension benefits either as:
- A single payment transfer to another plan,
- A separate lifetime pension.
This typically happens when the pension member becomes eligible to collect their pension, often starting at age 55, or earlier for certain professions.
Both Spouses Have Pension Benefits
If both spouses have pension benefits, you might opt to divide only the difference between the two plans (a method known as setting off an entitlement). This approach allows for:
- More flexibility in retirement planning,
- Potentially better protection of the overall value of the benefits.
A lot of time, we include the service of an actuary to provide us options.
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