New pension rules on marriage breakdown offer relief
With the value of a pension representing the largest store of wealth for many families, Ontario’s new rules for dividing pension assets when marriages fail are welcome news.
Despite separation agreements or court orders, the current rules don’t allow money to be transferred to the ex-spouse unless the member has already left the plan, through termination, death or retirement.
Now, once the rules kick in, the value of the pension can be settled immediately even though the plan member is still working.
The value will be available as of the marriage breakdown date, and the ex-spouse can either transfer it to a locked-in retirement account, remain in the plan to his or her credit, or switch to another registered pension plan if the plan allows transfers in, pension expert Ian Edelist told Benefits Canada.
If the pension has already started when the breakdown occurs, the pension is simply split although it may be reassessed so that both parties receive a pension based on their own life expectancy.
“The default position might be that the ex-spouse receives a pension while the member is alive; once the member dies, the ex-spouse’s pension stops and [he or she] will receive a survivor benefit of 60%," Edelist says.
Have you had trouble freeing up pension assets after a separation? Do you think these new rules may help?
By Gordon Powers, MSN Money
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