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If you worked in the UK and have a frozen company pension, we may be able to bring the funds, tax free, to Canada.
We have been helping to bring pension fund investments to Canada since 2001. The one constant is change – on both sides of the pond. The rules on taxation, transferability and eligibility are altered frequently. There is currently a window of opportunity for tax-effective transfers of pension monies.
Not all pensions are eligible for tax free transfer and there are some age restrictions. We will work with you to review your pension plans, determine your eligibility, understand the possibilities and explore options. We can then introduce you to one or more financial advisors to find the best fit for you and your family.
If appropriate, we will engage experts on both sides of the Atlantic so that you are fully informed and protected.
You could have the prospect of a better retirement. The solution often involves a tax free transfer to a special Registered Retirement Saving Plan (RRSP) which is also a Qualifying Recognized Overseas Pension Scheme (QROPS).
There is currently a window of opportunity for tax-effective transfers of pension monies. Nobody knows how long it will stay open.
Act today and you will soon enjoy the benefits:
Growing your Pension Faster
When you leave a company and its pension plan, your pension entitlement normally increases by the lower of inflation or some small percentage – often 2 or 3%. If you bring your funds to Canada, you can invest the money in a way that could exceed these returns and provide a bigger pension.
If you have more than one pension plan, you may be able to consolidate them into a single retirement savings account. You will have great flexibility over the mix and type of investments held in your account but you will have the simplicity of receiving regular reports on a single statement and will only have to deal with one administrator.
If a pension plan is transferred to an RRSP and the beneficiary dies, the investments can be transferred, tax free, to the surviving spouse. Tax will eventually be paid from the estate when the spouse passes on but the remainder will be available for beneficiaries. In the UK there could be a survivor’s pension (sometimes paying only half of the original pension). Once the spouse passes on, payments usually stop and there is nothing to leave to beneficiaries.
Avoiding Exchange Rate Risks
If you leave your UK pension plan outside Canada, you will eventually receive payments from it in local currency. You will have the expense and inconvenience of converting every payment to Canadian dollars. If you retire in Canada most of your expenses will be in Canadian dollars. All of the time you are enjoying your pension payments you are subject to swings in exchange rates. If you are lucky your income will be worth more than your expenses but what happens if the reverse is true?
You can remove this uncertainty by having your pension fund assets (income) and liabilities (expenses) in the same currency.
With most pension plans, you must start to draw the pension on a fixed date e.g. age 60 or 65. You may be required to purchase an annuity. Once your monies are transferred to a retirement fund in Canada, your investments can basically be left to grow, tax free, until you need them. There are few restrictions and no requirement to purchase an annuity but you can certainly do that if you wish.
Most pension funds give you little or no choice in how your funds are invested. Working with a fully qualified, registered financial adviser, you can create a portfolio that suits your needs perfectly. You can invest in just about anything that suits your appetite for risk (or the lack of it!).
Did You Know?
Pensions and the process of transferring them to Canada can be confusing. Our articles below can help you make informed decisions.
Frequently Asked Questions
No. There are basically two types of pension plan: (1) “Occupational Plans” where as part of a remuneration package an employer provides a retirement plan for employees (sometimes employees are allowed or are required to make extra contributions), and (2) “Personal Plans” where individuals (and or employers) make contributions which are invested to provide retirement income.
Occupational Pension plans can be transferred to a Canadian Registered Retirement Savings Plan (RRSP).
No tax is deducted in the UK and while the monies remain in the RRSP, no tax is payable in Canada. Although HM Revenue & Customs (formerly the Inland Revenue) will allow tax-free transfers of Personal Pension Plans from the UK, Personal Pensions cannot be transferred to an RRSP in Canada and the receipt of the pension monies could create a tax liability in Canada. We are actively seeking a solution to this problem.
Upon request by e-mail we will be happy to inform you when we find a solution or we become aware of changes in relevant legislation.
The above is not intended to be a definitive analysis of tax law. The comments contained herein are general in nature and professional advice regarding your particular tax position should be obtained in light of your specific circumstances.
No. State pensions are not transferable. However, once you become eligible, you can normally elect to have the payments sent to you in Canada.
Depending on the value and type of pension that you have, HM Revenue & Customs (formerly the Inland Revenue) may require that you have professional advice to determine if it is in your best interests to transfer a pension.
Advice from an adviser recognized by the UK Financial Conduct Authority (FCA) is required for Defined Benefit plans with a transfer value of £30,000 or over. We can determine if the advice is necessary and find a qualified adviser for you.
The professional adviser will charge a fee for this advice – it can usually be deducted from the proceeds of the lump sum being transferred. If advice is required for your pension, the pension fund trustees will not release the funds for transfer without receiving a written copy of the advice. Click here to watch a video explaining the advice process.
No. If your plan is eligible for transfer, you will receive what amounts to a one-time increase in the RRSP contribution limits. You declare the pension transfer as income and then take a deduction for the contribution to the RRSP. The net result is no tax while the funds remain in the RRSP and you can continue to make annual RRSP contributions in accordance with the government rules.
No. Transferring a pension plan to an RRSP allows you to invest in just about any type of investment. With the help of your personal Investment Adviser, you will set up a portfolio that contains the mix of cash, bonds, mutual funds and equities that suit your needs. At one time there was a requirement to limit the amount of an RRSP that could be invested outside Canada. These limits have now been completely removed. Your adviser will review your portfolio regularly to make sure it remains appropriate for your needs.
You may withdraw money from the RRSP when you reach “normal minimum pension age” as defined by HM Revenue & Customs. It is currently 55 but may be changed from time to time. Any withdrawal from an RRSP is subject to tax.
When you have provided the Investment Adviser with your plan details, he will contact the plan administrators to start the transfer process. While we would hope to bring the monies earlier, we have found that it can take two months to complete some transfers.
You cannot actually transfer your pension to an RSP until you have a Social Insurance Number (which is equivalent to a National Insurance number in the UK). This is issued soon after you immigrate. So if you are still in the UK, you can pull together all your pension information and be ready to contact us when you arrive.
Yes. If you decide to leave Canada and live elsewhere, you may want to collapse the RSP that now holds the pension monies. This can be done but requires careful tax planning and is likely to incur substantial investment and other fees.
If you cease to be a Canadian resident for tax purposes (e.g. you leave the country for a substantial period of time) in the first five full UK tax years after a UK pension is transferred to a QROPS in Canada, HMRC will assess a Foreign Transfer Charge (FTC) of 25% of the initial amount transferred. The same applies if you transfer to a non-registered plan or to a QROPS in another country.
After the 5 years have expired there is no FTC. You should most likely only consider bringing a pension to Canada if you intend to retire in Canada.
On reaching retirement age, many UK pension plans allow withdrawals of up to 25% of the value of the plan. These amounts are not taxed in the UK. If your plan remains in the UK but you are a Canadian resident, all payments from the plan are taxable in Canada. If you transfer the plan to Canada the monies remain sheltered from tax until you make a withdrawal. All withdrawals are taxable in Canada. Depending on how your plan in Canada is invested and how well these investments perform, over time, the tax on 25% of its transfer value should be offset by higher growth compared to leaving the plan in the UK. However, there are no guarantees.
We will be happy to try to answer any additional questions – click here to contact us.
PensionTransfer.ca Limited is an Ontario registered company that is associated with TransAtlantic Transfers Inc. which was founded in 2001. Together we have helped hundreds of people to have the prospect of a better retirement.
Ron Craig is an international banker with worldwide experience. He emigrated to Canada in 1987 and runs his own successful consultancy advising financial institutions. Ron has an M.B.A. from Cranfield University, England and is qualified as an Associate of the Chartered Institute of Secretaries and Administrators and as an Associate of The Institute of Bankers in Scotland. Based in Toronto, Canada.
Contact Us Today!
Contact the QROPS experts at PensionTransfer.ca today – you may have the prospect of a better retirement. There is no charge for an initial assessment and depending on the pension plan(s) that you have, there may be no out-of-pocket expenses to execute the transfer.