Can My Pension Be Seized?

Understanding Pension Seizure: Is Your Retirement Fund at Risk?

Retirement is a phase of life where financial security is of utmost importance. Pensions serve as a reliable source of income for retirees. However, a question that often arises is whether these pension funds are susceptible to seizure. This article delves into this issue, answering the crucial question: Can My Pension Be Seized?

Understanding Pensions

Before we delve into the specifics of pension seizure, it’s essential to understand what pensions are. Pensions are funds that employees accumulate over their working years, to be used as a source of income upon retirement. They can be either private or government-funded.

Legal Protection of Pensions

In general, pension benefits are protected from normal creditors under the Ontario Pensions Act. This means that typical creditors, such as credit card companies, cannot garnish these funds. This is because the Ontario Wages Act, which allows for garnishments, applies only to work wages, not pensions.

However, it’s worth noting that there are exceptions to this rule.

Exceptions to Pension Protection

Tax Arrears

If you are receiving Old Age Security (OAS) and Canada Pension Plan (CPP) benefits and have pending tax dues, the Canada Revenue Agency (CRA) can collect the tax arrears from your pension. They have the power to seize a portion of your pension, similar to how they can collect from your tax return.

In such cases, the CRA doesn’t directly take the money from you. Instead, you don’t receive the amount owed as part of your pension. This can be seen as a situation where the government gives with one hand while taking with the other.

Garnishments by Government

Unlike a wage garnishment by a creditor, the government does not need to go to court and obtain a judgment. They simply need to make the decision, and the process is carried out. This shows the broad powers that the government exercises in terms of pension seizures.

While the Ontario Wages Act allows creditors to garnish up to 20% of someone’s wages or 50% for child support, the CRA can seize as much as it deems necessary.

Bank Debts

Once a pension cheque is deposited into your bank account, it becomes money subject to seizure by a creditor who has obtained a judgment against you. Moreover, if you owe money to the bank itself, for instance for credit card debts or a car loan, your pension funds could be at risk.

Overdue Support and Maintenance Payments

If you are behind on your support and maintenance payments for your children and/or spouse, your pension can also be at risk. Through the Family Responsibility Office, up to 50% of your pension can be seized to pay these arrears.

Overpayment of Benefits

If you have received an overpayment of OAS or CPP benefits, the government can deduct the money owed from your pension payments, even if the mistake was theirs.

What You Can Do

If you find yourself facing the possibility of pension seizure, it’s important not to panic. There are options available to help you manage your situation.

Seek Professional Help

Organizations such as Bankruptcy Canada offer expertise and experience in solving debt and budgeting crises. They can help you navigate through your financial difficulties and achieve financial freedom.

Conclusion

While it is true that pensions are generally protected from seizure, numerous exceptions exist. From tax arrears to bank debts and overdue support payments, several situations can put your pension at risk. However, with careful planning and professional assistance, it is possible to navigate through these financial difficulties and secure your retirement income.

Remember, understanding your financial obligations and rights is the first step towards guarding your pension from seizure. Stay informed, plan wisely, and seek professional advice when needed.

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