Private Pensions

• What are private pensions?
• Can I withdraw funds from my locked-in private pension?
• Do locked-in private pensions affect my income assistance?
• Can I split my private pension with a spouse?
• If I go bankrupt can creditors seize my pension?
• What is an employment pension?
• How do employment pensions work?
• Does the amount of CPP benefits I receive affect the amount I get from my employment pension?
• If I receive a pension from my employment will it affect my income assistance?
• Can I get a share of my spouse’s employment pension if we separate or divorce?
• What are Registered Retirement Savings Plans (RRSPs)?
• How do RRSPs work?
• Can I take money out of my RRSP?
• What is a group RRSP?
• Can I contribute to my spouse or partner's RRSP?
• What is a spousal/common law RRSP?
• What happens if a couple separates or gets a divorce?
• How long can I contribute to my RRSPs?
• What happens to the RRSP when a person dies?
• Where can I get more information on RRSPs?

Q - What are private pensions?

Private pensions are similar to the CPP retirement pension in that they are arrangements to provide people with an income when they are in retirement and no longer have a steady income. CPP is a public pension plan set up by the federal government. Private pensions are set up by a person's employer (called employment or occupational pension) or through tax-deferred individual savings such as registered retirement savings plans (RRSPs) or registered retirement income funds (RRIFs).

For pension terms and definitions visit: http://www.sfsc.gov.sk.ca/Pensions/glossary.shtml#B

Q - Can I withdraw funds from my locked-in private pension?

In most cases you will not be able to withdraw funds from a locked-in pension. Locked-in refers to the restrictions and limitations on accessing pension monies that are imposed by statute, such as Nova Scotia's Pension Benefits Act (PBA).

The locked-in pension is designed to preserve pension assets for your retirement. In some very limited cases there are ways that you may access locked-in funds (for example, visit http://www.gov.ns.ca/lwd/pensions/faq.asp#lockedin).  For more information you should contact the pension administrator for the pension plan.

Q - Do locked-in private pensions affect my income assistance?

No.  Locked-in pensions do not affect income assistance until you start receiving pension payments. Unlocked pensions may affect the eligibility or the amount of Income Assistance you receive.  For more information you should contact your local Income Assistance office or visit the Department of Community Services website.

Q - Can I split my private pension with a spouse?

Yes.  Since, 2007 married spouses and common law partners (including registered domestic partners who have lived together for at least 12 months) can use private pension income splitting to reduce their taxes.  This includes all private pensions such as employment based pensions as well as RRSPs and RRIFs.

You can give up to 50% of any income that qualifies for the pension income tax credit to your spouse or partner; usually the lower wage earner. There are certain requirements that you must meet.  

For more information and a list of the eligibility requirements you should    contact Canada Revenue Agency at 1-800-959-8281, visit their website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/pnsn-splt/menu-eng.html or speak to a tax planner or accountant. 

Q - If I go bankrupt can creditors seize my pension?

It depends on the laws that govern the pension.  For example, under the Nova Scotia Pension Benefits Act pension funds are given special protection and cannot be seized by creditors.  If you are thinking about bankruptcy you should speak to debt counsellor or a bankruptcy trustee for professional advice.

Q - What is an employment pension?

An employment pension usually requires both the employer and employee to contribute money to a fund, during employment, in order to receive benefits upon retirement. Some employment pensions are funded in other ways, such as from labour unions, government agencies, or self-funded schemes. Employment pensions may also include additional terms such as paying benefits to survivor's or disabled beneficiaries.

Q - How do employment pensions work?

There are generally 2 types of employment pensions; defined benefits and defined contributions.
 

• Defined Benefit Plan: A defined benefit plan guarantees a certain payout when an employee retires. The amount is based on a fixed formula which usually depends on the person's salary and the number of years he or she paid into the plan.

• Defined Contribution Plan: A defined contribution plan provides a payout at retirement that is based upon the amount of money a person contributed and the performance of the investment.  In a defined contribution plan your contributions are paid into a separate account for each employee.  The contributions from that account are then invested, for example, in the stock market and the returns made from that investment are placed back into your individual account.  When you retire, the money is in that account can be used to fund your retirement.

For general information about employment pensions visit the Nova Scotia Labour and Workforce Development website at http://www.gov.ns.ca/lwd/pensions/employer.asp

For more information about a specific employment pension you should contact your pension administrator.

Q - Does the amount of CPP benefits I receive affect the amount I get from my employment pension?

The answer depends on the terms and conditions of the private pensions plan. A private pension may be reduced based upon the amount you receive from CPP. You should contact your employer’s pension administrator for information.

Q - If I receive a pension from my employment will it affect my income assistance?

Yes. Your pension, whether it is private or CPP, is considered income. The amount of income assistance and whether you are eligible to receive it is based in part upon your pension income.  For more information contact the Department of Community Service or visit the website at http://www.gov.ns.ca/coms/employment/income_assistance/index.html

Q - Can I get a share of my spouse’s employment pension if we separate or divorce?

Married spouses and registered domestic partners are automatically entitled to share in their spouse's pension after separation. 

This does not necessarily mean that you will get half your spouse’s/ partner’s pension.  That will depend on the applicable legislation and regulations that govern the particular pension, as well as any written agreement or court order between you and your spouse or partner.  For example, under the Nova Scotia Pension Benefits Act if the other assets of the marriage or partnership are sufficient, then your share of your spouse’s pension may be satisfied in a property settlement by trading off other assets that have the same value as your share of the pension or pension benefit.

For common law and same sex partners who have not entered into a Registered Domestic Partnership their entitlement depends on the different laws that apply.  Different laws apply depending on the type employer you have.

For example, the Pension Benefits Act of Nova Scotia (PBA) applies to people who work for provincially regulated employers, such as manufacturers.  The PBA only permits the division of the pension earned from the date of marriage to the date of separation.   Common law partners and registered domestic partners are entitled to share in a partner's pension after two years of living together up to the date of separation provided neither partner is legally married to someone else. 

You can get more information on how pensions covered under the PBA are divided by going to the Nova Scotia's Department of Labour and Workforce Development website at http://www.gov.ns.ca/lwd/pensions/pubs.asp
   
Other laws apply to people who are teachers, provincial civil servants, judges, or members of the Nova Scotia Legislature. The Teacher's Pension Act governs teachers and the Public Service Superannuation Act governs pensions for provincial civil servants, judges and members of the legislature.  Both Acts allow common law partners to share in their partner's pension after separation if they have lived together for three years. 

For more information visit the Nova Scotia Pension Agency at http://novascotiapension.ca

Federally regulated employers such as railways, airlines, banks, are governed by the Federal Pension Benefits Standards Act (PBSA).  The Act applies Nova Scotia law to pension division for separating common law partners who have lived together for at least one year.

The Pension Benefits Division Act (PBDA) applies to federal public service pension employees, members of Parliament, Canadian Forces, and RCMP. Under this Act separating common law partners may receive a share of their partner's pension benefits if they have lived together for at least one year. 
   
For more information on PBDA pension division visit the website at
http://www.tpsgc-pwgsc.gc.ca/pension/act/lppr-pbda/info-eng.html

If you are going through separation or divorce you should contact a lawyer for professional advice. 

Q - What are Registered Retirement Savings Plans (RRSPs)?

A RRSP is an account that provides tax benefits while you save for your retirement in Canada. 

Q - How do RRSPs work?

You put money into an RRSP account through a financial institution such as a bank or investment company. For the most part, the contributions you make are deductible from your taxable income so it reduces the amount income tax you will have to pay.  Income earned in an RRSP is not taxable while it remains in the RRSP so it can grow tax free until you withdrawn the money.

Q - Can I take money out of my RRSP?

Yes.  You can transfer certain types of payments to an RRSP or from one registered plan to another, such as a Registered Retirement Income Fund (RRIF).  Generally, the amount you transfer directly to your RRSP does not affect the RRSP deduction limit.

 For more information on transferring visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/menu-eng.html. 

You can also withdraw (or cash out) amounts from your RRSP before it starts to pay a retirement income.  Be aware that you may have to pay tax on the amount you withdraw. 

If you have a locked-in RRSPs you may not be allowed to make withdrawals.  Money in a locked-in RRSP is usually the transfer value of pension benefits you built up in a former employer's pension plan and which were moved into the RRSP when you left that employer or stopped being a member of the plan. 

For more information on withdrawing from RRSPs visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/yrwn-eng.html.

For more information on withdrawing from spousal or common-law partner RRSPs visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/spsl-eng.html.

Q - What is a group RRSP?

A group RRSP is arranged by an employer for employees to make contributions, as they choose, through a schedule of payroll deductions. Generally, an employee can decide the size of contribution per year and the employer will deduct that amount and submit it to the investment manager for the group account. The contribution is then deposited into the employee’s individual account and invested. Under a group plan the contributor sees the tax savings immediately, instead of having to wait until the end of the tax year.

Q - Can I contribute to my spouse or partner's RRSP?

Yes.  Married couples, common law partners and registered domestic partners can make tax-deductible contributions to each other's RRSPs.  The contribution will reduce the deduction limit for the partner who makes the contribution.  This is called a spousal/common-law RRSP.

If you and your spouse or partner separate you can transfer money from one partner's RRSP to the other's, tax free, as part of a property division. Canada Revenue Agency will require a court order or written separation agreement from you.

Q - What is a spousal/common law RRSP?

A spousal or common-law partner RRSP is an RRSP:
•    to which the person's spouse or common-law partner contributes;
•    that receives payments or transfers of property from RRSPs to which a spouse or common-law partner has contributed; or
•    that receives payments or transfers of property from RRIFs to which the person has transferred amounts from other spousal or common-law partner RRSPs

Q - What happens if a couple separates or gets a divorce?

If you are living in a common-law relationship you and your partner will each keep your own contributions following separation unless there is a written agreement, you and your partner choose to do otherwise, or a court orders otherwise. 

For married couples the spouses’ contributions (made during the marriage) to a RRSP are considered matrimonial assets and will be shared equally between them, unless the spouses agree otherwise, or a court orders otherwise.  The Federal Income Tax Act provides for a "rollover" which allows RRSPs to be transferred from one spouse to the other without any income tax consequences.  A court order or written separation agreement is required by the Canada Revenue Agency. 

If you are going through a separation or divorce you should contact a lawyer for professional advice.

Q - How long can I contribute to my RRSPs?

You can contribute up to December 31 of the year you turn 71. After that you must choose to do one of the following with your RRSPs:

•  withdraw them;
• transfer them to a RRIF;
• use them to buy an annuity for life (a form of insurance that provides a monthly payment); or
• use them to buy an annuity spread over a number of years.
  

When you withdraw funds from your RRSPs, you may have to pay tax on it and the issuer will withhold the tax for payment to the Canada Revenue Agency.  For more information visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/menu-eng.html

An RRSP issuer will not withhold tax on amounts that are transferred directly to a RRIF or that are used to purchase an annuity. You may have to pay tax on the income when you start receiving payments from the RRIF.  RRIFs are another form of tax-deferred investments, but operate a bit differently.  For more information on RRIFs visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrif-ferr/menu-eng.html

For more information on RRSP transfers visit the CRA website at http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/menu-eng.html

Q - What happens to the RRSP when a person dies?

You can name a beneficiary so that when you die the RRSP will go to the beneficiary directly and not into your estate. This may save on tax and probate costs.  If there is no beneficiary the RRSP monies go to your estate and will be divided according to what is set out in your will. 

If you do not leave a will, the Nova Scotia Intestate and Succession Act will apply and your estate will be divided in accordance with the list set out in the Act. Common law partners may be excluded from benefiting. It is important that common law couples make a will and name a beneficiary for RRSPs. You should talk with a lawyer about your situation.

Q - Where can I get more information on RRSPs?

The CRA has detailed information on RRSPs on their website at
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/rrsps-eng.html.

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