Moving Your UK Pension To Canada
Canada has long been a top destination for British expats wanting to start a new life abroad. With its breathtaking scenery, exceptional quality of life, and cultural proximity to the UK, it’s no wonder so many choose to move here.
Although a relocation to Canada can bring many benefits, navigating the financial aspects of the move can be challenging, particularly if you are considering transferring your UK pension.
Should you keep your pension in a UK scheme or transfer it to a retirement account in Canada?
If you're preparing to move, you might be curious about your pension options as a Canadian resident.
UK Pensions In Canada
For UK expats living in Canada, keeping your pension with your UK provider may not be the best option. UK schemes are designed for UK residents, and as a Canadian resident, it may be difficult to access funds, adjust and manage your portfolio, or receive payments directly into your bank account in Canada.
Furthermore, converting pension payments from Sterling to Canadian Dollars exposes you to exchange rate fluctuations, potentially resulting in financial losses over time. These risks, combined with the possibility that UK pension providers may be unable to offer advice or manage your pension once you’re a Canadian resident, mean you may need to turn to locally regulated providers for guidance.
Additionally, UK pensions often have limited drawdown options, and you may still be subject to UK tax on any pension income. Given these challenges, its best to explore alternative pension solutions tailored to your new life as a non-UK resident.
Financial Advice For British Expats In Canada - The Wealth Genesis
UK Pension Transfers To Canadian RRSP
Canada is one of the few countries in the world where transferring your UK pension scheme to a local solution remains an option, provided the scheme meets certain criteria.
The Canadian scheme must be recognised by HMRC as a QROPS (Qualifying Recognised Overseas Pension Scheme), you must be at least 55 years old, a Canadian resident taxpayer, and intend to live in Canada for at least five years.
In addition, the pension scheme must be based in Canada if you want to avoid incurring the Overseas Transfer Charge which will be a significant 25% tax on the transfer's total value.
There are currently a few Canadian RRSPs (Registered Retirement Savings Plan) which qualify for QROPS status, and you can access the list of approved schemes here. Do note that since HMRC frequently updates this list, it’s crucial to confirm the latest information before proceeding.
Whilst moving your UK pension to Canada is still an option, it’s important to thoroughly assess all your available choices, as this may not be the most tax-efficient solution. Seek advice from an expat financial adviser to ensure you are fully aware of the implications before making a final decision.
Financial Planning | Transfer to International SIPP
For UK expats residing in Canada, the International SIPP (Self-Invested Personal Pension) is the most effective solution for managing retirement savings. This UK-based scheme has been created specifically for British expats and retains the protection of UK pension regulations.
Some key advantages of the International SIPP include:
Flexibility and Tax Efficiency:
The International SIPP offers flexible drawdown options, enabling you to manage your taxable income and liabilities. This can also include a 25% tax-free lump sum, which, while potentially taxable in Canada, can often be offset through contributions to a local Canadian RRSP (Registered Retirement Savings Plan).
Mitigating Currency Risk:
This scheme helps protect against currency exchange losses by enabling you to hold and invest in multiple major currencies, including CAD. This flexibility minimises the impact of frequent currency conversions on your savings.
Diverse Investment Opportunities:
The scheme also provides access to a broad array of investment options, giving you the chance to grow your retirement funds while managing tax obligations efficiently. By controlling how much of your pension funds are converted into CAD, you can customize your retirement strategy to align with your individual goals and financial circumstances.
Reduce Capital Gains Tax Implications:
By using an International SIPP, you may also be able to ensure that you do not incur any capital gains tax liabilities as long as your capital stays invested in the scheme.
Expat Wealth Management Specialists
If you’re a British expat currently living in Canada or preparing to relocate, transferring your pension doesn’t need to be a complicated or stressful process.
At The Wealth Genesis, we help expats in Canada find the right pension solutions for their individual circumstances.
