Understanding CPP sharing

What does CPP pension sharing mean?

First of all, it’s important to differentiate between CPP “pension sharing” and CPP “credit splitting” (officially known as Division of Unadjusted Pensionable Earnings or DUPE).

Pension sharing is a temporary sharing of CPP retirement pension benefits between spouses in an ongoing relationship, whereas a DUPE is a permanent splitting of pension “credits,” after a relationship has ended through separation or divorce.

CPP Sharing is sometimes referred to as CPP Splitting.

Related article:  Understanding CPP Splitting

CPP sharing is possible in both legal marriages and common-law relationships.

What is the purpose of CPP pension sharing?

The main purpose of pension sharing under the CPP is tax savings. CPP pension sharing is a form of income splitting.  Pension sharing really only produces a tax savings if one spouse is receiving more CPP and is in a higher tax bracket than the other spouse.

Related article:  Income splitting strategies in retirement

How does CPP pension sharing work?

Contrary to what most people think, CPP pension sharing does not necessarily result in a 50/50 sharing of retirement pensions, unless the couple have lived together for their whole lives or at least since the older spouse turned age 18.

What really happens is that they share their retirement pensions based on how many years they have lived together, in proportion to their “joint contributory period” under the CPP.

Related article:  The differences between CPP Sharing and Pension Splitting

What is the joint contributory period?

In simple terms, the joint contributory period starts when the older spouse turned age 18 and ends when both start receiving their CPP retirement pension. If one spouse has never contributed to CPP, it ends when that spouse reaches age 70 or when the application for pension sharing is received, whichever is earlier.

An example to show how CPP pension sharing works

Let’s look at a simple example where Allan and Carol were born three years apart, and they both started receiving their CPP at age 65. Their joint contributory period would be 50 years (from when the oldest turned age 18 until the youngest turned age 65 and started receiving CPP).

Let’s say that without pension sharing, Allan’s monthly CPP retirement pension would be $500 and Carol’s retirement pension would be $1,000. The following chart shows what effect pension sharing would have on the amounts that each of them would receive, depending on how many years they lived together during their 50-year joint contributory period.

Number of years lived together

Percentage of joint contributory period (50 years)Monthly CPP after pension sharing

Allan

Carol

10

20%$550$950

20

40%$600

$900

3060%$650

$850

4080%$700

$800

50100%$750

$750

As you can see from the above chart, the CPP pension sharing produces a 50/50 split only if Allan and Carol lived together for all 50 years of their joint contributory period.

Is it always necessary to do a two-way sharing?

CPP pension sharing is always a two-way sharing, unless one of the spouses never contributed to the CPP. In that situation, a one-way sharing is possible, as long as the non-contributing spouse is at least 60 years old.

When does CPP pension sharing end?

As mentioned earlier, unlike credit splitting which is permanent, pension sharing is temporary. It will end the earliest of:

  • The month in which either spouse dies
  • The 12th month after the spouses separate
  • The month of divorce
  • The month following receipt of a written request from both spouses

Comments

  1. Jason Watt

    Doug,
    Does the amount of each cheque actually change, or is it just the T4As that change?

    • Doug Runchey

      Hi Jason – Yes, the amount of each spouse’s monthly pension cheque will change and thus the T4A slips will match the actual payment to each spouse.

  2. Elaine Nicholson

    I would like to know the ramifications if the higher CPP pension owner dies. What would the surviving spouse receive. Does he or she then just get their own pension amount and a paltry survivor benefit? As women generally live longer than men and men usually receive a higher CPP pension this would leave the survivor, assuming she is female with a vastly decreased income.

    • Doug Runchey

      Hi Elaine – There is a complicated formula to determine how much CPP the surviving spouse will receive as a combined retirement/survivor’s benefit. Read this article to better understand this issue: https://retirehappy.ca/cpp-survivor-benefits/

  3. Paul Comeau

    If my wife who is five years older than I am has started drawing the CPP.
    Can we apply for pension sharing when I apply for my CPP at 60 or maybe 65?

    • Doug Runchey

      Hi Paul – CPP sharing is only possible once you are both receiving your CPP, so “Yes” if your wife takes her CPP now you can share when you apply later at whatever age.

  4. Paul Comeau

    Hello Doug,
    If I have a spouse and I die before I start drawing my CPP, does the pension die with me with nothing going to my spouse?

    • Doug Runchey

      Hi Paul – Eligibility for a CPP survivor’s pension isn’t affected by whether you are or aren’t receiving CPP when you die. If you are receiving your CPP when you die, the amount of your survivor’s pension isn’t affected by whether you took it early or late, because it’s based on your “calculated retirement pension” which is the amount of your CPP prior to any age-adjustment factor being applied.

  5. Ann DuBose

    Hello Doug,

    I am divorced and able to apply for cpp this year… a court order says my x husband has to split cpp pension 50% with me… I am in titled to half split for the 12 years of marriage… how does this work… is my pension increased by his contributions or would I receive a separate cpp pension once he turns 60 and is eligible to receive… my statement shows eligible earnings as CS but does not show contributions amount??? I feel confused can you help me understand this

    Thanks Ann

    • Doug Runchey

      Hi Ann – If your CPP statement already shows “CS” beside the years that you lived together, you have already received 50% of his pensionable earnings for those years (the amount of contributions is irrelevant in this situation) and your CPP benefit will be calculated to include those earnings whenever you decide to apply for your CPP. Your CPP amount won’t change if/when he applies for his own CPP.

  6. Dean McConnell

    I am 3 months younger than my husband and I have applied for my CPP which will begin in September. My husband applied today and his will start in June. We both are taking it at 60. My husband is still working but I am not. Is it an advantage for us to share his CPP income for tax purposes?

    • Doug Runchey

      Hi Dean – You cannot share his CPP until September, when you are both receiving your CPP. At that time it must be a 2-way sharing, so the answer as to whether there’s any tax advantage will depend on which one of you will receive the larger CPP prior to sharing and which one of you has the higher taxable income aside from CPP.

      • Dean McConnell

        My husband will be receiving the higher CPP and has the higher taxable income and I am not working and will receive a small CPP in September so would it be an advantage to share his CPP?

        • Doug Runchey

          Hi Dean – I think the answer is clearly “Yes”.

  7. Kevin G

    Hi Doug. Good article. Does the joint contributory period change if one of the parties is an immigrant who came to the country, say, in her late 20’s? She wouldn’t have contributed to CPP until she immigrated, at least. In my case, she didn’t

    • Doug Runchey

      Hi Kevin – Under the CPP legislation, everyone’s “contributory period” begins at age 18, even if they’re not living in Canada.

    • Steve Bridge

      Dean, I think a bigger question for you would be, Why would you take CPP at 60? Unless you have a shortened life expectancy or financial hardship, waiting until at least 65 and more often 70 will result in more money in your pocket over the long run. Doug has run a lot of these numbers and I am pretty sure would back me up on this. (I am an advice-only planner and have run many many client scenarios and waiting until 70 always gives you more money). There are many reasons to wait, not the least of which is to get more money out of your RRSP accounts at a lower tax bracket.

  8. Kevin G

    ….even start contributing to CPP until into her 30’s; so, does that change things even further?

    • Doug Runchey

      Hi Kevin – As with the previous question/answer, “contributory period” is defined under the legislation as the period when someone could legally contribute to CPP, not when they did contribute.

  9. Joseph S.

    Hi Doug, my wife has been receiving CPP disability benefits since she was 58 and she will continue to receive is until 65. she is now 62 and I’m 64 and have been receiving early CPP, Can I share my CPP with her now that she is over 60?

    • Doug Runchey

      Hi Joseph – No, you’ll have to wait until she’s 65, because pension-sharing of CPP applies only to retirement pension, not a disability pension.

  10. Murray S

    Hi Doug, Am I right in understanding that CPP sharing will cause two different tax slips to be sent out to each of my wife and I?. And that these tax slips will effect our total income on our tax returns? Therefore, that overall income for the purposes of OAS recovery tax will be effected downward for the higher income earner?

    • Doug Runchey

      Hi Murray – Yes, CPP pension-sharing will be reflected on each of your T4A(P) slips and will reduce the OAS recovery tax of the higher income earner, assuming that spouse also has the higher CPP.

  11. Fred Stills

    Hi Doug. I originally said yes on a form for Pension Sharing when I was 65. This was solely my decision at the time.
    Now that I am 68 I want to cancel, however I know my X would not agree to it.I know she will not send the form in.We are not divorced and we have lived apart for 26 yrs.She has turned 65 this year.

    Can I still send in the form or do I have to wait until I a 70.
    Thanks

    • Doug Runchey

      Hi Fred – If you have been separated for 26 years the pension sharing should never have been approved in the first place, so you should now be able to cancel it anytime you wish. On the other hand because you’ve been separated for more than one year, your wife can apply for CPP credit splitting, but the split will only affect the years prior to your separation.

  12. Keith

    My mother is headed for a Nursing Home. Currently they share CPP equally, however my Dad’s true portion is approximately 95%. When we fill out the Involuntary Separation papers, will the CPP revert back to Dad receiving his true share, and Mom receiving her true share?

    • Doug Runchey

      Hi Keith – Involuntary separation rules normally just affect GIS entitlement amounts and would necessarily stop the CPP pension-sharing. If you want that to stop, they should each sign a form requesting that it be stopped.

  13. Susan

    If I agree to pension sharing with my spouse and determine that the tax savings is not significant, can I cancel at any time? If yes, how do I cancel?

    • Doug Runchey

      Hi Susan – Once pension-sharing has been approved, it requires consent of both parties (in writing) to end it.

  14. Louise Bertrand

    Can I apply for pension sharing retroactively?

    • Doug Runchey

      Hi Louise – No, it is not retroactive.

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