# Case study: CPP credit split

One of the services that my business offers is to analyze the impact that a CPP credit split would have on a couple’s CPP retirement pensions, in advance of either party applying for a credit split.

The reason for this service is that approximately half of the credit splits that are done result in a net loss of CPP benefits to the couple, and if the couple know in advance that they will lose benefits, they can decide not to apply.

In most cases, the reason for this net loss of benefits is overlap of the credit-split period with the period covered by the child-rearing dropout provision.

Related article: Child Rearing Drop Out

Of the cases that I have reviewed, the highest net loss of benefits to the couple as a result of a credit split has been almost \$200 per month, with the average loss being approximately \$100 per month. The usual pattern is that the male spouse loses approximately \$150 to \$200 per month, while the female spouse only gains approximately \$50 to \$100 per month.

## Rick and Alice’s situation (not their real names)

Rick and Alice were married and started living together on October 15, 1994, and they separated on November 15, 2014. They had two children, born in June 1999 and August 2004. Both spouses worked full-time during the first years of their marriage. When their first child was born, Alice started working part-time, and she later stopped working altogether and became a stay-at-home mom.

At the time they contacted me, they were negotiating a separation agreement and wanted to know what to do about the CPP credit-splitting provision.

## Impact of a credit split on their pensionable earnings record

Based on the dates they gave me, if a CPP credit split were done, it would include the whole period of 1994 through 2013 (beginning with January of the year that they started living together and ending with December of the year prior to their separation).

The following table shows Rick and Alice’s CPP pensionable earnings before and after the potential credit split.

## CPP pensionable earnings

Before After
YearRickAliceRickAlice
1994\$21,885\$33,905\$27,895\$27,895
1995\$15,025\$23,137\$19,081\$19,081
1996\$11,494\$31,790\$21,642\$21,642
1997\$10,852\$34,614\$22,733\$22,733
1998\$20,248\$36,900\$28,574\$28,574
1999\$37,400\$18,590\$27,995\$27,995
2000\$37,600\$12,868\$25,234\$25,234
2001\$38,300\$16,832\$27,566\$27,566
2002\$39,100\$10,720\$25,910\$25,910
2003\$39,900\$20,584\$30,242\$30,242
2004\$40,500\$12,510\$26,505\$26,505
2005\$41,100\$5,126\$23,113\$23,113
2006\$42,100\$9,772\$25,936\$25,936
2007\$43,700\$0\$21,850\$21,850
2008\$44,900\$0\$22,450\$22,450
2009\$46,300\$0\$23,150\$23,150
2010\$47,200\$0\$23,600\$23,600
2011\$48,300\$0\$24,150\$24,150
2012\$50,100\$0\$25,050\$25,050
2013\$51,100\$11,612\$31,356\$31,356

## Impact of a credit split on their retirement pension calculations

Both Rick and Alice plan to continue working until age 65, at which time they plan to apply for their CPP retirement pensions.

Based on my calculations, a CPP credit split would cause them both to lose money. A credit split would decrease Rick’s CPP by \$142.45 per month, and it would decrease Alice’s CPP by \$35.37 per month.

My obvious recommendation was that they agree not to apply for a credit split.

## What causes the decrease to both of their retirement pensions?

The cause of the decrease to Rick’s CPP is fairly obvious. His earnings were higher than Alice’s during 15 of the 20 years that they were together, so a credit split would reduce his net pensionable earnings and would thus reduce his CPP retirement pension at age 65.

The cause of the decrease to Alice’s CPP is less obvious. She will lose some earnings to Rick for the first five years of their marriage when her earnings were higher than Rick’s, but she will gain earnings for the other 15 years, especially for the six years where she had zero earnings. Why then would her CPP retirement pension decrease as a result of a credit split?

The answer is the CPP child-rearing dropout provision (CRDO or CRP.)

## How does the CRDO cause Alice’s retirement pension to decrease?

Alice can use the CRDO to drop out the entire period of time from July 1999 through August 2011, when at least one of the children was under age 7, if her earnings during those years were less than her lifetime average earnings level. With or without a credit split, her earnings are less than average for most of those years and she will drop out most of those 12 years.

That means that the only real impact of a credit split to her CPP retirement pension calculation is the loss of earnings during the first five years of the marriage, and this therefore would result in a decrease in her CPP at age 65.

## Conclusion

While it’s unusual that a CPP credit split would reduce both spouses’ CPP benefits like this case did, it’s common that it creates a net loss of CPP benefits, especially if it overlaps with a period of CRDO eligibility.

1. Walter Lord Charest

Doug….Well written. This article was very informative. Based on your article it would appear that CPP credit splitting does not work most of the time. An example on when it would make sense to CPP credit split would be helpful.
Thanks

• Doug Runchey

Walter

Thanks for the comment. Although I have found that a CPP credit split creates a net loss approximately half the time, that means that it provides a fair result the rest of the time.

I’ve even seen one case where both spouses received an increase in their pensions as a result of a credit split. I will take your suggestion and provide the details on this case as a subsequent article.

• M. McGill

As you are aware Doug when there is a period of child rearing were one spouse leaves the work force this is when the decrease in net benefits occur. You can of course try to appeal this through the Governments Tribunal process under the charter of rights for Marriage. The division between this method and that were spouses remain married is different in how it handles this period. That is of course if you can find yourself a lawyer that will deal with it. I did, and did get a tribunal hearing. This however required an additional more detailed document (charter of record as well a reply document to the governments response to your Charter record). This process will cost you a pretty penny, this is where I had to draw the line. The government has far more resources and time in order to deal with this than the typical individual. Good luck if you try this route.

2. Jenine

Doug I am currently trying to decide if my ex and I should do a Cpp credit split. If I have each of our pensionable earnings for each year and the dates of staying home with kids under 7, would you be able to provide the formula used to determine the impact of the credit spit?

3. Diane Green

Hi Doug. I also worked for CPP for 30 years before retiring in 2010. If I recall correctly there is a provision in the legislation allowing a division of pension credits to be cancelled and pension credits to be restored to their original owners if the division is detrimental to both parties. This is almost always as a result of the Child Rearing Drop Out Provision.
When I was working there this provision was seldom used even if it was applicable as it required manual calculations to determine if it was detrimental to both parties. I don’t know if this has changed.

• Doug Runchey

Diane – Yes that provision still exists, but they both have to be receiving their CPP before the credit split for this to apply.

4. David

Hi – I was married from 1971 to 1979. I am now in my 70th year, and have been receiving the CPP benefit since I turned 60. (I re-married in 1985.) My first wife has approached me with the idea of splitting CPP credits pertaining to the time we were married. (Neither one of us had ever heard of the notion of CPP credits and credit splitting!) Can you tell me if my current benefit will be affected if I enter into a credit-splitting arrangement with her. Thanks in advance for any help you can offer.

• Doug Runchey

Hi David – Yes, your current CPP benefit would be affected if you agree to do a CPP credit split.

5. Sue

This is great information Doug.
As a general rule of thumb, if both spouses made the maximum pensionable earnings (the”M” on the Statement) for all but the last 2 years of the marriage, would there be any benefit in applying for credit splitting? Neither my spouse nor I had much pensionable earnings during the last two years of our relationship (one of us had “0”). Is it worth making an application to credit split for only 2 years of low contributions?

• Doug Runchey

Hi Sue – In the situation that you describe, there would be very little impact (plus or minus) if either of you applied for a credit split. You would both keep your “M”s for the years that you both had “M”s, so the only change would be for the other 2 years. If one of you had zeroes for those 2 years and the other had 1/4 max for those 2 years, a credit split would potentially increase the zero-contribution spouse by approx. \$7 per month and might decrease the 1/4 max spouse by approx. the same amount.

6. James

Hi Doug, I have been paying the maximum CPP deductions for the majority of my career. When I retire I will get a pension from age 53. Upon my CPP being received, my pension drops by the same amount my CPP provides, leaving me the same income. My wife has not worked in numerous years due to a car collision. She has almost No CPP contributions. Does it make sense to split the CPP credits so that she has a CPP benefit and thus my pension does not go down by that amount yet her CPP will go up? Thanks, Jaymi

• Doug Runchey

Hi Jaymi – I don’t think this will work for a couple of reasons. First, you may want to check with your private pensioner provider to make sure how the reduction for CPP is actually calculated. Most plans have a reduction at age 65 based on a formula that approximates an age-65 CPP retirement pension, so it doesn’t likely matter when you take your CPP or what the actual amount of your CPP is. Second, you can only do a CPP credit split if you are separated or divorced.

7. Barbara

Hi Doug
To CS or not to CS is the question……I am also one of those wondering whether to apply for credit splitting the more I delve into it. I have just turned 60 and won’t be retiring until 65. I was married in 1978 and then had 3 children 1979, 1981, 1986,off work for 2 years for each child, working part time before, in-between each child and then working fulltime from 1989 on until our separation in 1998. I therefore have about 12 years with no CPP contributions or very little while working part-time. My spouse was seasonal from 1978 until 1982 then maxed out his CPP the remainder of our marriage until 1998.
After reading all your comments I assume that I should NOT apply for credit splitting since it may not be beneficial to me and nor my ex husband who is already retired having just turned 63(already receiving CPP at age 60). Perhaps I should just stick to just the child rearing? I have called CPP to get an estimate but was told you can only do one or the other, credit split or child rearing provision. The officer also could only estimate for the child rearing provision…about \$170 for 3 children…and unable to give estimate for credit splitting. Please advise??

• Doug Runchey

Hi Barbara – Your situation certainly fits the common outcome where a credit split will likely decrease your ex-husband’s CPP more than it increases yours. If you’re on speaking terms at all, I strongly encourage you to consider using my services to calculate the impact of a credit split before you decide what to do. Here is a link to my website where I explain this service further: http://www.drpensions.ca/dr-pensions-credit-split-calculation.html

• Annette

Barbara ,just to let you know ,you do not split your credits for the last five years because your x is collecting his CPP , so no credit splitting there .

• Doug Runchey

Hi Annette – You are correcting in stating that the CPP credit split would not include any of the period since her Ex started receiving his CPP, but the credit split actually would end as of December 1997, since they separated in 1998.

8. Lewis

I was separated and divorced back in 1992 after seven years of marriage, and there has been no contact since then. I’m turning 60 in a few months and I have no idea if she filed for CPP splitting or not.

When I log into Service Canada for CPP info, there is no indication of a pension split, and my benefit estimates are close to the maximum allowed.

Would I have been contacted, or would there be a note on my Service Canada record, if my spouse had file for splitting CPP benefits?

• Doug Runchey

Hi Lewis – Yes, you should have been notified if your spouse ever applied for a CPP credit split, and it would definitely show a “CS” beside each year that was divided as a result of a credit split. So it hasn’t happened, yet.

9. Jan

Hi, Doug,

I was married from 1981 to 1999. From 1985 to 1999 I was a stay-at-home mom. My ex worked a fairly good job and paid the maximum contributions to CPP.

I recently turned 60 and applied for CPP and the credit split. I was shocked to see my small CPP pension of \$300. only go up by \$80 (from the credit split). I called Service Canada and was told it is based on the years I worked before, during, and after my marriage for credit splits. From what I have read online, I understood the credit splits were only based on the years we were together. Can you clarify?

• Doug Runchey

Hi Jan – The CPP credit split does only affect your earnings for the years that you were living together, so the \$80 gain was only for the earnings that you gained as a result of the credit split. Unfortunately, your ex-husband’s CPP will likely decrease by far more than your CPP increased, because your case is a perfect example of what’s wrong with the system. Depending on what age your ex-husband takes his CPP, it could decrease by as much as approx. \$300 per month.

10. eloise robinson

common law married 15 years 2 children, never heard of cpp credit splitting being mandatory. found out 20 years after the fact that I only had a 4 year time limit for applying. he was main bread winner, I was abused and cpp kept telling me I had to get him to sign off on a law for fair equalization. Sending me back to an abuser has made my entering the life of the aged going to be very poor. how can they send you back to your abuser in hopes of equalization when it was suppose to be mandatory in the first place.

• Doug Runchey

Hi Eloise – I don’t know what/where you’ve been reading, but CPP credit-splitting is never mandatory, especially not in common-law partnerships. The only part of credit-splitting that is mandatory is that if the department is notified that a legally married couple has been divorced, the department must approve a credit split.

11. David

Hi Doug, I am going to apply for a CPP credit split. Will the office that handles my request let me know before everything is finalized if the split will result in a loss to me or do I find this out after everything is said and done? My ex-wife and I were together for 26 “eligible” years. I maxed out in terms of CPP contributions for 6 of those 26 years. I believe she maxed out in all 26 years. We both worked while raising our children so I don’t think the CRDO applies here. Thank you.

• Doug Runchey

Hi David – I can calculate what the impact would be in advance, but Service Canada can’t/won’t.

12. Libby

Hi Doug, My husband and I were married for 20 years and are now divorcing. I have discovered my husband has had high, unreported cash income, throughout the marriage. Therefore he has contributed very little to CPP. How does this affect a CPP pension split? is a CRA audit required?

• Doug Runchey

Hi Libby – Depending on what level of earnings you had during the marriage, it sounds like a credit split might not help you or it might even hurt you. I suppose alerting CRA might result in a few years worth of earnings and CPP contributions which could then be subject to a credit split.

13. Dave

Hi Doug, My wife and I were married 19 years from 1982-2001. We have 2 children, born in 1984 and 1986. During the years that the children were born, my wife worked part-time or not at all. The other years, 1982-83 and 1994-2001 she didn’t make the max.. When we divorced, she applied for credit split. I have worked for over 45 years, always making the max. I am being affected for my CPP as I look to retire soon. Can I get my ex-wife to change the credit split to child rearing years after all these years, as it would benefit me and probably not affect her to much. I intend to work 2 more years and will have 47 years of paying the max. I know they take your best 39 years.

• Doug Runchey

Hi Dave – Unfortunately, once a credit split has been done it can’t be undone. The further bad news is that she can still claim the child-rearing dropout in addition to the credit-splitting, so she may not even use some of those earnings that she gained from you as a result of the credit split.

14. Cathy jones

hey doug
I was married from oct -1993-until sept 1 2019 I have completed the forms for cpp splitting as my spouse has always worked and i have only returned to work as of 2008 as I stayed home with the children from 1995 on.. WE seperated on sept 1 2019. Our court order was dated nov 21 2020. how does it work do I have to wait until I am 65 to collect? Does it switch to my name? I am now on reduced hours from my job I only can work 3 days a week due to a medical condition.

• Doug Runchey

The period of the credit split will be from January 1993 through December 2018 (begins with January of the year that you started living together and ends with December of the year prior to separation). For each year during that period your pensionable earnings will be added together with his pensionable earnings and each of your CPP pensionable earnings records will be credited with half of those yearly totals, in place of whatever your actual earnings were for those years. The equally divided earnings will then be used by each of you separately whenever you become eligible for a CPP benefit, which could be as early as age 60 (at a reduced rate) for the CPP retirement pension.

15. muriel darcy

Hi..I separated in 2004..a lawyer applied for Cpp disability which I got. He did not advise about credit splitting at that time…I had seen a pamphlet on it, so called Canada Pension. I asked when zi needed to apply..I was told it could affect my pension inc9me so did not apply until 2018. I received credit splitting and was t9ld my cpp disability would increase by \$100.00 /month.
Then I wrote a letter asking for cpp disability retropayment from 2004- 2018 about \$20,000.00. I received a letter asking to proove agent told me this but had a fire so no records. A current kaiser suggested I obtain my legal file as well as cpp file.
Online cpp disability application states that Government “We will notify you whether cpp credit splitting could help you” I was
never notified. Question then , do you feel govt should have told me that because I was on disability, that if I applied it could affect my disability Not just my pension?
Do you think retro payment is justified?
How far back do phone call recordings go?

• Doug Runchey

Hi Muriel – There is nothing in the CPP legislation that would require Service Canada to ever advise you about CPP credit splitting, but there is legislation that’s intended to protect you if they give you wrong advice and you lose money as a result. It would be much more likely to win if you had documentary proof of your contact and what was said, but it might be worth pursuing in any case. I have no knowledge of how long they retain phone call recordings, but I’d be surprised if it’s more than one year.

16. David

Is CPP splitting just for divorced couples, or would it be beneficial in some situations (and allowed) for a couple that is still married? Both retired almost 60 years old each, no kids, Husband with max pensionable earning and more retirement income LIF and RRSP’s than wife ( no LIF, less in RRSP and about 75% of max pensionable earnings).

• Doug Runchey

Hi David – CPP “credit splitting” is a permanent reallocation of pensionable earnings “credits” between spouses after a separation/divorce and is not available to intact couples. Pension sharing however, is a temporary reallocation of CPP retirement pension benefits between spouses such as you describe.