By Mark Demas
Financial issues often become the most complicated part of a divorce. While the family home is usually the first asset people think about, pensions and RRSPs can be just as significant — and sometimes even more valuable. For many Albertans, retirement savings represent decades of work, long-term planning and expectations for financial security. When a relationship ends, understanding how these assets are divided is essential.
The Family Property Act governs how property is divided when married spouses or adult interdependent partners separate. Retirement assets fall squarely within that framework. Because pensions and RRSPs operate differently from other assets, they require careful analysis to ensure both partners receive a fair share.
This guide explains how Alberta law treats pensions, RRSPs and related retirement savings, and what separating couples need to consider as they work toward a final property settlement.
Why Retirement Assets Matter in Divorce
Pensions and RRSPs often become some of the highest-value assets in a relationship. A defined benefit pension earned over a long career can exceed the value of a family home. RRSPs, TFSAs and employer-matched plans can accumulate quickly over time.
The challenge is that these accounts are not as straightforward as cash in a bank account. Their value depends on complex factors including tax implications, vesting rules, pension legislation and date-of-relationship calculations. That complexity means small mistakes can lead to large inequities.
Alberta law aims to ensure a fair division based on contributions made during the relationship and the financial partnership between spouses.
The Legal Framework: The Family Property Act
The Family Property Act (FPA) applies to both married spouses and adult interdependent partners (AIPs). The Act states that, subject to specific exceptions, property accumulated during the relationship is presumed to be divided equally.
Pensions and RRSPs are considered family property to the extent that contributions were made or value was earned during the marriage or AIP relationship. Amounts accumulated before the relationship began may fall into the “exempt property” category, but only the growth on exempt property may need to be divided.
This is one of the most misunderstood aspects of family law. Even if a pension was partly earned before the relationship, the increase in its value during the relationship may still be divisible. Courts look at fairness, contributions and the overall financial picture.
How Pensions Are Divided in Alberta
Pensions generally fall into two categories:
1. Defined Benefit (DB) Pension Plans
These promise a fixed monthly payment at retirement based on years of service and salary. Examples include many public-sector plans such as:
- Alberta Teachers’ Retirement Fund (ATRF)
- Local Authorities Pension Plan (LAPP)
- Public Service Pension Plan (PSPP)
These pensions can be worth hundreds of thousands of dollars, making them among the most significant assets in a divorce.
2. Defined Contribution (DC) Pension Plans / Group RRSPs
These function like investment accounts, where the final value depends on contributions and market performance. Balances can be divided more directly.
Determining the Value of a Pension
Before a pension can be divided, it must be properly valued. Alberta uses two main methods:
1. The Alberta “Proportional Division” Approach (statutory formula)
Under this approach, the pension plan administrator calculates the value of the portion earned during the relationship. The spouse receives a share directly from the plan upon retirement or through an immediate transfer option, depending on the plan rules.
2. Actuarial Valuation
Some pensions require an actuarial valuation that determines:
- The present value of future pension payments
- The share attributable to the relationship
- Any tax adjustments
- Cost-of-living indexing
Actuarial valuations can be technical, but they provide a clear financial snapshot that supports fair negotiation when required.
Courts will not divide pensions based on estimates — accurate valuation is essential.
How Pension Division Works Practically
Once the value is established, federal and provincial pension legislation governs how division occurs.
Many Alberta plans follow a “division-at-source” model, meaning the pension administrator transfers the spouse’s share directly into their locked-in retirement account (LIRA). Other plans require equalization through lump-sum payments or credits in the overall property division.
The Family Property Act presumes that each spouse receives half of the marital portion of the pension — though unequal division may be ordered in exceptional circumstances.
Treatment of CPP Credits
The Canada Pension Plan (CPP) is treated differently than other pensions. Instead of being divided like property, CPP credits earned during the marriage can be shared through a process called credit splitting.
CPP credit splitting:
- Can increase the lower-income spouse’s future CPP retirement income
- Reduces the higher-income spouse’s future CPP payment
- Applies automatically if both spouses request it and eligibility conditions are met
Applications are made through Service Canada. More information here.
CPP credit splitting is separate from the property division process and should be considered early in settlement negotiations.
How RRSPs Are Divided in Alberta
RRSPs and RRIFs are part of family property division when they were accumulated during the relationship. RRSPs contributed before the relationship began may be exempt, but the growth may still be divisible.
Key considerations:
- RRSP values are assessed as of the valuation date, which may be the date of separation or a date agreed on by the parties.
- Withdrawals before settlement can complicate division.
- RRSP division is usually handled through a tax-free transfer under Section 146 of the Income Tax Act when part of a separation agreement or court order.
Transfers must be done properly to avoid triggering income tax. This is why legal and financial advice is crucial before cashing out or reallocating RRSPs.
Locked-In Retirement Accounts (LIRAs) and TFSAs
Other retirement vehicles such as LIRAs, LIFs, and TFSAs may also need to be divided. Each has different tax implications.
- TFSAs are divided based on contributions during the relationship.
- LIRAs and LIFs often come from previous pension transfers and may require third-party valuations.
Proper documentation and full disclosure are essential.
The Importance of Full Financial Disclosure
The Family Property Act requires both spouses to exchange complete financial disclosure. Without accurate information, pensions and RRSPs cannot be fairly divided.
Disclosure typically includes:
- Pension plan statements
- RRSP and TFSA statements
- Notices of Assessment (CRA)
- Payroll and employment documents
- Defined benefit pension service records
Courts may draw adverse inferences or order unequal division if one spouse hides information or delays disclosure.
For further reading, see: Courts demand full financial disclosure in family law cases.
Can Retirement Assets Be Excluded?
Some retirement assets may be excluded from division, such as:
- RRSP contributions made before the relationship
- Pension service accumulated before marriage or AIP status
- Certain inheritances or gifts directly traceable to one spouse
However, the increase in value during the relationship is often shareable. Tracing can be complex, especially for assets held long before the relationship began.
Unequal Division: When Fairness Requires It
While equal division is the default, courts may order unequal division when:
- One spouse made reckless financial decisions
- There was economic misconduct
- The marriage was very short
- An equal split would create severe financial hardship
- One spouse’s exempt property significantly outweighs the other’s assets
Unequal division remains the exception, not the rule. Alberta courts favour predictability unless compelling circumstances exist.
The Role of Separation Agreements
A well-drafted separation agreement can address retirement savings clearly and proactively. It may:
- Set out the valuation dates
- Confirm exempt portions of pensions
- Specify tax-free RRSP transfers
- Direct how pension credits will be divided
- Set timelines for exchanging information
- Outline dispute-resolution processes
For more context, see: What is a separation agreement and why should you have one?
Why Valuation Expertise Matters
Defined benefit pensions, in particular, should not be estimated casually. Working with actuaries and financial professionals can:
- Prevent under- or over-valuing pensions
- Clarify tax adjustments
- Support negotiation fairness
- Reduce future disputes
Most Alberta family lawyers regularly collaborate with valuation experts to ensure accuracy.
How Demas Schaefer Family Lawyers Can Help
At Demas Schaefer Family Lawyers, we help Albertans understand and divide retirement assets fairly during separation or divorce. Our team provides clear, practical guidance and works with pension administrators and financial professionals to ensure accurate valuations.
We assist with:
- Pension valuation and division
- RRSP, TFSA, and LIRA division
- CPP credit-splitting applications
- Separation agreement drafting and negotiation
- Mediation, collaborative law and litigation
- Financial disclosure
- Complex property division cases involving exempt and non-exempt assets
Retirement assets are too important to leave to guesswork. We offer a free 15-minute telephone or video consultation to discuss your situation and outline your options.
Contact us today to learn how we can support you.