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, this does not apply in Canada. Most withdrawals from a pension plan are taxable for Canadian residents.
If eligible, the entire proceeds of the UK pension could be transferred to Canada and could be invested for you in a special type of RRSP. The plan can grow, tax free, until you are ready to take out some income. Invested wisely, over time these investments could grow substantially and the increased value could outweigh the loss of the tax that could have been saved on the 25% lump sum. However, as we all know, investments can go down as well as up.
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 whether or not it makes sense for you.