CPP Splitting A Different Process

I learned something important on my “So You Think You Can Retire” course. If you have a private pension, splitting your income with your spouse is easy. If you wish to split your Canada Pension Plan benefits, it is a quite different kettle of fish.

A while ago, a decision was made that allowed a couple to share Pension income from a company pension plan. This change lowers the effective tax rate on the pension income.  For those with private pensions this was a big deal and could mean a large tax savings for retirees.  To accomplish this, you simply submit a T1032 Joint Election to Split Pension Income. After that, you benefit by potentially saving tax money. If you don’t want to do it the year afterwards, you simply don’t submit this form.

Splitting CPP benefits is a very different kettle of fish.

You must submit forms to Service Canada asking to split your CPP benefits with your spouse (or common law partner). Both spouses need to sign the forms to get this all put in place. It’s relatively straightforward, just a little bit of government red tape (or so you might think).

To stop sharing benefits with your spouse, both individuals must agree. They need to sign the forms together. It doesn’t sound like much. However, if you become estranged from your spouse, and don’t wish to share your CPP benefits with them, they still have to agree to this as well.

Pensions and Divorce is a very complicated issue, but not just before retirement.

Another important thing to check out if you are lucky enough to have a Private Pension is how does your Pension Plan deal with the following interesting issues:

• Death of the Pension holder. Typically there is a survivor benefit, but what else? Does the surviving spouse get medical benefits? How big is the survivor benefit? 
• Separation of the Pension Holder from their spouse. Remember separation is not the same as divorce. If you get separated, live common law with someone else, and then pass away, who has rights to the Pension? You should figure that one out.
• What happens if the pension holder dies and there are dependent children, do they receive any survivor benefits?

There are lots of interesting questions to explore. Having a pension is a massive benefit for your retirement planning. You should understand all the “ins and outs” of your pension program.

Thanks to Jim Yih also, for his post Differences Between Personal Pension Splitting and CPP, which I cribbed some information from.

CPP2 Adds to the Equation

Don’t forget about CPP2. This needs to come into your calculations as well.

CPP Pension Sharing vs. Pension Income Splitting

Not all pension-splitting techniques are created equal. Here’s a quick reference guide comparing CPP Pension Sharing with Pension Income Splitting in Canada:

Feature	CPP Pension Sharing	Pension Income Splitting
Applies To	Canada Pension Plan (CPP) retirement benefits	Private pension income (e.g., company pensions, RRIFs)
Administered By	Service Canada	Canada Revenue Agency (CRA)
Eligibility	Spouses/common-law partners receiving or eligible for CPP	Canadian-resident spouses not separated at year-end
Application Process	Apply through Service Canada with both parties’ signatures	Submit CRA Form T1032 with tax return
Tax Impact	CPP payments split for potential tax savings	Up to 50% of pension income can be reallocated for tax purposes
Flexibility	Requires mutual consent to change; rigid	Annual election; easy to change yearly
Termination	Ends on divorce, death, or long separation	Can be revoked/changed annually
Other Considerations	Based on contributory months; no effect on survivor benefits	CPP and OAS not eligible for splitting under this method

---

---

📚 Government of Canada Resources

• Pension Sharing – Canada Pension Plan (CPP)
• Pension Income Splitting – CRA Overview
• Form T1032 – Joint Election to Split Pension Income
• Splitting CPP Credits After Divorce/Separation
• Canada Pension Plan – Full Overview
• Canada Pension Plan and Enhancements

💼📊 CPP & EI Max Pay In Updates

Yes, it is a topic I write about, as it is essential to me. Here are a few from the past years to compare and contrast (hint see how much CPP has gone up).

• Only EI went up in 2024 but they are still taking it out too
• With Inflation roaring CPP and EI for 2023 went up
• For 2022 the CPP and EI Limits went up again
• The 2021 limits for CPP and EI were
• CPP and EI for 2020
• CPP and EI for 2019
• Merry New Year, CPP, EI and #MoneyTalk (2017)
• Gosh Darn it! CPP & EI Again!!! (2014)
• Fun with Numbers for 2013 (CPP and EI)
• Gosh Darn CPP and EI! (2010)
• Fun with Numbers with CPP and EI (2007)