Can I Transfer My UK Pension To Canada? | The 2024 Guide
LEARNING OBJECTIVES
We’re passionate about providing relevant, high quality and up-to-date financial information to Expats in Canada.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING
How UK pensions work in Canada
What QROPS options are available
The issues associated with transferring to an RRSP
Why an International SIPP is commonly used by Expats in Canada
This article is intended for Canadian residents who hold pension pots in the UK.
Many British expats move to work or retire in Canada after building a pension pot in the UK. Naturally, it can be tempting to transfer your pension provisions to a local Canadian retirement account. While this is one option to consider, other alternatives may be more suitable.
UK Pension for Canadian Residents
A workplace pension accumulated through your employment in the UK, or a personal pension like a SIPP, is acknowledged by the Canadian authorities. However, it is still a UK pension for UK residents and as such, has many disadvantages.
These include limited draw-down options, currency risk, no ongoing management or investment strategy, and of course being subject to UK tax.
Furthermore, many pension providers do not allow Canadian residents to access or make any adjustments to their portfolios. You may also be told to find a new scheme altogether.
UK Pension Transfers to Canada | QROPS
You can transfer your pension from the UK to a foreign pension plan. The receiving scheme needs to be classed as a QROPS (Qualifying Recognised Overseas Pension Scheme).
Canada is one of the few countries that has onshore schemes that do qualify. Currently, there are three such schemes, a list of which can be found below and here.
Note HMRC updates this list monthly so always check the current information before initiating a transfer to a QROPS.
Transfer UK Private Pension to Canadian RRSP
An RRSP (Registered Retirement Savings Plan) is a Canadian pension scheme or 'QROPS' from HMRC’s perspective. Should you wish to transfer to one of the three listed on HMRC, specific criteria are required.
You need to be 55 years of age or older
A Canadian tax resident
Planning to live in Canada for a minimum of 5 years
There are benefits and disadvantages of transferring one or more UK pensions to an RRSP. An article assessing this in greater detail can be found here.
The key disadvantage is regarding the Canadian tax perspective and UK income tax.
The transfer into your RRSP can create a liability of 25%. Furthermore, if you leave Canada or access the pension pot within 5 years, UK tax rules will apply.
International SIPP Canada
An alternative and more attractive option for most UK Expats is an International SIPP.
An International SIPP is a UK pension scheme that has been specifically created for non-UK residents. As it is a UK scheme, the transfer of one or more UK pensions is a non-taxable event in the UK and Canada.
The Self Invested Personal Pension will allow the following:
Flexible access including 25% lump sum paid free of UK tax. Note that Canadian tax is due on this but there is an option to pay this into an RRSP which can offset the tax liability.
Ongoing management of the pension assets in line with your individual retirement goals. Whether that's income, capital preservation, growth, or a combination of all three.
A wider range of investments and you can invest and receive payment in Canadian dollars. Importantly, you and your adviser can control when and how much you convert to CAD$. This means you can take advantage of the exchange rate and not have to convert the total amount in one go, which you would with an RRSP.
Via an NT code, you can receive all income payments gross of UK income tax with the relevant taxes paid in Canada.
Control over the value and frequency of withdrawals. This mitigates unnecessary tax liabilities by being pushed into higher tax bands.
Transfer Personal Pension Plan To Canada
If you are a Canadian resident and want to transfer your UK pension to Canada, it is prudent to assess the options available and the impact of doing so.
Since the Introduction of the international SIPP in 2016, an alternative, and often far more suitable option is now available.
Obtaining expat financial advice specific to your position should be the starting point. The Wealth Genesis can help you navigate and complete the complex pension transfer process.
As an independent advisory firm, we do not tie ourselves to one specific provider or solution. Financial planning is never a one-size-fits-all-all and the key is delivering your bespoke objectives and the suitability of the product.
Book a discovery meeting using the button below to discuss your position in greater detail with a member of our expert advice team.
FAQs
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The suitability of the product is solely dependent on your unique position.
The International SIPP is more commonly used due as no tax liability is created. However, that may not be the priority for everyone. -
The Wealth Genesis charges a flat £3000 to transfer and consolidate all your pensions. Ongoing costs are 0.85% management fee plus product costs.
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With an International SIPP, there is no need to transfer out as the product is a UK pension scheme.
Should you transfer to an RRSP and move back under 5 years, tax will be due.
Alternatively, there is the option to repatriate your pension back into a UK pension scheme. -
This refers to the 25% tax free pension benefits that you can withdraw from your UK pension fund from age 55. (57 from 2028).
Importantly this is not tax free in Canada. It will however be paid to you gross of UK tax. -
This is a UK tax policy and not reciprocated by the Canadian authorities
