A Defined Contribution (DC) plan is a retirement account where both an employer and employee make contributions to an employee’s own individual retirement pot – the employee has flexibility to take the income any way they wish but the amounts depend on how much was contributed and how those contributions were invested.

If you leave a DC plan in the UK it is most likely to be invested in British pounds. British investments often grow in line with British inflation and hopefully plus a little something. If you have left the UK for good you may be more interested in Canadian inflation and investing in North American stocks. Some of your retirement income will be in British pounds but expenses will be paid in Canadian dollars – a mismatch. You could avoid this exchange risk and transfer the DC plan proceeds in Canadian dollars to a special type of RSP. The money can be invested according to your wishes until you are ready to retire.

Some people make the mistake thinking that the biggest risk to their pension is always where it is invested in the stock market.  If you have you left a pension behind in the UK and are not invested in Canadian dollar investments, your biggest risk may actually be one of currency.  The value of British Pounds versus Canadian dollars has seen swings as large as 32% over the last 5 years.

The value of British Pounds versus Canadian dollars has seen swings as large as 32% over the last 5 years.

If you leave your plan in the UK and it comes into payment, you will normally be paid in British pounds. You will have all the hassle and expense of converting them to dollars each time and as the value fluctuates, each month your payment could be worth more or less.  You have no certainty nor the comfort of knowing exactly what your pension is worth in local terms.

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?

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?

You might need advice before you are allowed to transfer a UK Defined Benefit pension plan.

To protect you from fraud the UK’s tax authority – HMRC – will not allow trustees to transfer a DB pension with a value of £30,000 or more without the advice of a consultant regulated by the FCA.
Did You Know?

If you are going to retire in Canada and you have a Defined Benefit Pension in the UK, life might be better if you transfer the funds to Canada.

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.