A Defined Benefit (DB) plan, is an occupational pension for which both an employer and employee make contributions into a pooled fund for the benefit all employees It provides a promised level of income to each employee based on the number of years employed and income e.g. two thirds of final salary.  You do not have your own retirement pot but instead have a defined income.

To protect you from fraud and from making investments that may result in lower income from your pension, the UK’s tax authority – Her Majesty’s Revenue and Customs (HMRC) – will not allow trustees to transfer a DB pension with a value of £30,000 or more without the advice of a pension transfer specialist that is authorised and regulated by the Financial Conduct Authority (FCA).

If you are thinking of transferring a DB plan to Canada, you should contact an expert recognized by the FCA – there are not many firms that have the proper licence. We recommend Jim Bell of Dominion Financial Management in the UK.  Feel free to contact him directly or contact us and we will explain the process, discuss options and make a personal introduction if you wish. There is no charge for an initial discussion.

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Did You Know?

If you live in Canada and intend to retire there too, there is little value of having a UK pension that allows you to take a tax free lump sum.

Many UK pension plans allow the beneficiaries to make a withdrawal of 25% on reaching the retirement age. In the UK that 25% lump sum is not taxed. Unfortunately, most withdrawals from a pension plan are taxable for Canadian residents.
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).