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 |
| 30 | 60% | $650 |
$850 |
| 40 | 80% | $700 |
$800 |
| 50 | 100% | $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
Doug,
Does the amount of each cheque actually change, or is it just the T4As that change?
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.
I just applied for my cpp and was approved. My husband is applying right now but is trying to apply for the ccp sharing and it won’t let him because it says he’s not 60 yet. But he will be 60 this month. So does he have to be approved for regular cpp and then apply for cpp sharing?
Maybe that’s a restriction that they have created if you apply online, because there is no such restriction if you apply by mail or in-person.
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.
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/
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?
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.
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?
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.
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
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.
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?
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.
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?
Hi Dean – I think the answer is clearly “Yes”.
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
Hi Kevin – Under the CPP legislation, everyone’s “contributory period” begins at age 18, even if they’re not living in Canada.
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.
….even start contributing to CPP until into her 30’s; so, does that change things even further?
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.
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?
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.
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?
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.
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
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.
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?
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.
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?
Hi Susan – Once pension-sharing has been approved, it requires consent of both parties (in writing) to end it.
Can I apply for pension sharing retroactively?
Hi Louise – No, it is not retroactive.
Hello Doug ,
What form has to be filled out to apply for CPP sharing for a couple that is NOT divorcing or separating? I I have found form ISP-1901 online but i don’t think it is the right one to use. Please help.
Hi Isabela – You’re right that that is the wrong form. The correct form is the ISP-1002, and here’s a link with more info:
https://www.canada.ca/en/services/benefits/publicpensions/cpp/share-cpp.html
Hello Doug
I am not wanting to pension share with my spouse. Can she get pension sharing approval from the government for CPP without my consent in writing. She is applying for CPP at age 65.I have been receiving CPP for 6 years and it would put me in a higher tax bracket which I cant afford. Please advise. Thank you. I live in Ontario Canada.
Hi Marilyn – No, your spouse cannot get CPP pension-sharing without your written consent.
What is the benefit of CPP pension sharing since we can split our income on our tax return?
Hi Etta – You cannot split your CPP incomes at income tax time, just on your tax returns.
Hello Doug,
Say one delays applying for CPP after 65 and gets the 8.4%/yr increase, how would that increase be affected by pension sharing? Would the net increase be reduced where the spouse is younger?
On the same note, how would that increase influence the survivor benefit for that person’s spouse? Is any % increase carried over to the survivor benefit?
Hi Serge – No, the increased amount would not be reduced as a result of being shared with a younger spouse. No, the increased amount will not increase nor reduce the amount of any future survivor’s pension.
Is there any benefit to me applying for cpp before 65? I have applied for cpp splitting as we are divorced and our agreement allows for it. My ex is collecting now. Thanks
Hi Virginia – The benefit to applying for your CPP before age 65 is that you receive payments sooner. The benefit to delaying is higher payments.
Can I split my CPP credits 4 years after I started collecting CPP?
Hi Randy – Why do you want to split your CPP credits and who would you split them with?
Hi Doug- A friend of mine did not split his CPP credits with his spouse when he first started drawing CPP in 2018.
It would have been advantageous tax wise if he would have split his CPP with his spouse.
Can he rectify the situation and start splitting his CPP with his spouse going forward?
Simply put- Can a person split his credits with his spouse anytime or does the window close after he starts drawing CPP?
Hi Randy – If your friend and his spouse are still living together, they can’t split their CPP credits at all. Not before he started receiving his CPP, nor after. This was one of the main points that I was trying to make with this article and my other article on CPP credit splitting. Credit splitting can only be done if a couple have separated or divorced. What your friend and his spouse could do though is pension-sharing. Terminology does matter! Assuming that his spouse has also contributed to CPP, the pension-sharing must be a two-way sharing and can only be done if/when they are both receiving their CPP retirement pensions, but the window never closes until one of them dies.
You are right. Wrong terminology although your last sentence does answer my question. Thank you very much.
This is a fantastic article with great information, questions and answers.
When filing your taxes each year, there is a place for pension income splitting. Is CPP pension splitting not possible using this option. I thought that once both parties reach 65, you could choose to move a portion of your pension income over to the lower income spouse? Both my spouse and I collect a pension from the military. We are both under age 60. I also get CPPD. My benefits / income are significantly more than his pension. I am able to allocate a portion of my military pension over to him. I cannot allocate any of my CPPD until I’m 65. My question is… do I need to formally apply to share or can I simply do that each year when I file just like my other pension earnings?
Hi Marlene – In order to “share” your CPP, you must both be receiving CPP retirement pensions and you have to complete a CPP pension-sharing application. It cannot simply be shared at tax time like other pensions can. By the way, don’t call it CPP splitting, because that terminology is used to refer to credit-splitting under CPP, which occurs if/when your relationship ends with separation or divorce. CPP pension-sharing is the terminology you should use.
Hi Doug, a reminder to your reader’s. The application for CPP pension “Sharing” can be done online if they have a My Service Canada account. Select > Canada Pension Plan/Old Age Security; then under the CPP Provisions section select > Apply for CPP pension sharing. Much easier and faster than using the paper form and snail mail.
Hi Doug, I believe I have the understanding of the basic calculation. However, I require clarity on how the calculation is done when both spouses have deferred their CPP. Is the calculation done on the “adjusted amount (the amount they get by deferring) or the “calculated” amount (the amount they would be entitled to had they both turned 65 the month before they actually began collecting CPP . I’m not sure if I’m using the correct terminology so let me give you and example. Let’s say both spouses delay receiving their CPP. Shortly after they begin receiving their monthly CPP payments they decide to apply for CPP pension “sharing”. Based on the formula in your article it’s determined that 90% of each other’s CPP qualify for the 50% sharing. Spouse A is receiving $1585/month (22.4% increase for deferring for 32 months) and spouse B is receiving $722/month (2.1% increase for deferring for 3 month’s). Would the amounts used in the sharing formula be Spouse A: $1585; Spouse B: $722
or
Spouse A: $1295; Spouse B: $706
Hi Mark – The sharing formula would be applied to their actual or adjusted amount, not to their calculated amount, so that would be your first example.
hi!
My parents have been separated since 2008 and legally divorced since 2012. They were married for 27 and raised 3 children together. My father has been retired for 2 years and has been collecting CPP. He is now getting divorced from his second wife who has encouraged my mom to go after half of his CPP. However, my mom thinks she may have signed off on that when they divorced. Is she able to collect from him?
Hi Leah – Did she agree not to do a CPP credit split when they divorced?
My spouse is 7 years older than me and turns 60 next year. He does not have much in the way of CPP contributions and has not made a contribution in the last 20 years. I want to share my pension with him. Do I have to wait until I turn 65? My pension is more than double his at this point. I am 52. I have been on CPPD for the last 8 years as well. Does pension sharing affect this?
Hi Marlene – You have to wait until you are receiving a CPP retirement pension before you can do pension-sharing with your spouse.