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Pension valuations
Pensions are often people’s most valuable asset, and are considered to be a matrimonial asset under the Matrimonial Property Act of Nova Scotia.
Defined benefit pensions are complex assets and can be difficult to deal with on divorce. There are two fundamental issues to consider: the mechanisms available to actually divide the pension and whether these mechanisms divide the pension fairly.
Pension Division
There are two primary mechanisms to divide a defined benefit pension: the actual pension payment can be split at retirement or a lump sum payment can be made from the pension plan to the non-member spouse. The law in Nova Scotia allows one or both of these option, but does not permit the pension to actually be divided until the member retires or terminates membership in the pension plan; the non-member spouse becomes a limited member of the plan and receives their portion of the pension in the future. Alternately, the member spouse can “buy-out” the non-member spouse and not divide the pension at all. In order for a “buy-out” to occur, a fair value needs to be assigned to the pension (so the correct amount of the buy-out can be established).
Fair Value for the Pension
Assigning a value to a defined benefit pension is not a straight forward task (click here for more information). There are many different ways to value a defined benefit pension. This leads to much confusion when couples are attempting to assign a value to a defined benefit pension on marriage breakdown. Nova Scotia’s Pension Benefits Act does not permit an immediate division of the pension; the non-member spouse must wait until the member has terminated or retired. If the couple wants to settle the pension immediately, the member will need to buy out the non-member spouse and a fair value needs to be assigned to the pension; this value will generally need to be determined by an independent actuary. The value that is provided by the plan adminsitrator is the value of the pension assuming that the member terminates their membership in the plan immediately; if the member is not likely to terminate their membership in the plan, this value can be less than the fair value of the pension from an actuarial/economic perspective. If the parties want to ensure that a fair value is being assigned to the pension from an actuarial/economic perspective, in many cases a full actuarial valuation by an independent actuary is required.
Foreign pensions/pensions from other provinces
In the case of foreign pensions, it is likely that an actuarial valuation by an independent actuary would be required. Actuaries can assist clients by valuing pensions from other countries and providing the lump sum value of a foreign pension in Canadian dollars and ensure that the valuation is in accordance with the standards of practice of the Canadian Institute of Actuaries; this valuation will enable the couple to include the fair value of their foreign pension with the rest of their matrimonial assets.
Please read the information below and contact us if you have any questions.
- How are pensions in Nova Scotia divided on marriage breakdown?
- Supplemental pension plans are often overlooked
- Why should a defined benefit pension be valued by an actuary?
- Can we use the value of the pension provided by the pension plan administrator?
- Does the value of person’s pension assets need to be adjusted for income tax?
- Pension valuations frequently asked questions
- Information for RRSPs/LIRAs
- Information on our services and fees
Valuation of stock options and restricted stock units (RSUs)
Some employers provide stock option and/or restricted stock unit grants as part of an employee’s compensation. If stock options or restricted stock units have been granted during the period of marriage and have not been exercised at the date of separation, these options/units are generally considered matrimonial asset and may need to be valued. For more information, click the link below.