A Defined Benefit (DB) plan, is a retirement account for which both an employer and employee make contributions that promise the employee a set payout at retirement e.g. two thirds of final salary. When you left the UK for Canada, your final salary was frozen at the amount that you were earning on the day you left the company. DB plans will “inflation proof” that amount by increasing its value in line with inflation so that pension you actually get when your retire will have the same purchasing power as on the day you left. That is a valuable feature and the lump sum transfer value you would get when transferring out the money from the plan will be much higher because of it. Your retirement expenses will be growing in line with Canadian inflation (which could be quite different from UK inflation).  So a transfer out into a QROPS may be a better fit with your retirement plans.

If the investments grow at a rate higher than inflation you may well have more money to spend compared with leaving the plan in the UK.  However, as we all know, investments can go down as well as up. You will also avoid the exchange risk between the pound and the dollar – your income from Canadian investments will pay for expenses in Canadian dollars.  Again, a better fit with your lifestyle.

Managing a pension plan from over 3,000 miles away is hard. Give us a call or e-mail and we would be happy to explore if you are eligible to transfer a UK pension and maybe you too will have the prospect of a better retirement.

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Did You Know?

When your pension plan starts paying out, the amounts received will be taxable in Canada whether you leave the pension in the UK or have it transferred to Canada.

If you transfer your UK pension to Canada, it may qualify to go into a special type of RRSP. There is no tax on the lump sum transfer and you would only pay tax when you take some money out.
Did You Know?

Not every UK pension is eligible for transfer.

There are two major exceptions: The first is the old age or state pension and the second is any unfunded pension plan (often provided by the Public Sector e.g. National Health Service, Teachers, Civil Service, Police, Military).
Did You Know?

Some pension amounts are defined as “Trivial” and you can cash them in.

Right now, but subject to change, if the total lump sum value of your UK Defined Benefit and Defined Contribution pension plans is £30,000 or less you can withdraw the Defined Benefits amounts in cash and bring it to Canada.