Transfer UK Pension To Canada RRSP
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date financial information to British Expats in Canada
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How to transfer your UK pensions to Canada
The benefits and potential issues with transferring to an RRSP
The International SIPP for Canadian residents
Best practise when taking advice
This article is intended for Canadian residents who hold UK pensions.
If you have lived and worked in the United Kingdom, you will have a UK pension plan. When your country of residence changes to Canada, the retirement plan held is no longer the most suitable.
Naturally, transferring to overseas pension schemes QROPS is a consideration. A QROPS Qualifying Recognised Overseas Pension scheme, is any scheme held outside the UK, that is recognised by HMRC.
The receiving scheme will need to adhere to certain criteria and whilst offering some benefits, will also have some downside. Due to the double tax treaties between the two countries, a transfer can look appealing. However, on closer inspection, there are many pitfalls to be aware of.
Transfer My UK Pension To Canada RRSP
An RRSP - Registered Retirement Savings Plan is a Canadian pension scheme. Like UK pension funds, they are tax-efficient retirement planning vehicles. There are currently three providers of RRSPs in Canada that fall under QROPS categorisation.
To transfer your UK pension to an RRSP, you need to meet certain criteria, they are:
Be a Canadian tax resident.
Age 55 or older.
Intending to stay in Canada for at least 5 years.
The RRSP contribution must occur by December 31st in the calendar tax year when you reach age 71.
You can only get your UK Pension as a single payment, not in regular instalments.
If the answer is no to any of the above, transferring your SIPP, personal pension, or company pension to Canada is not a viable option.
Benefits Of UK Pension Transfer to Canada
Key benefits of bringing your UK pension scheme to an RRSP are:
Simplify your assets by having them all in one place
Work with one sole financial adviser in Canada to handle all your assets and provide financial planning for the Canadian system
Hold all your investments in Canadian dollars CAD$. The manner in which this is achieved can also be a disadvantage as detailed below regarding exchange rates.
The transferred pension pot can be used to obtain an offsetting deduction from the income inclusion.
Disadvantages of Transferring Your Pension from The UK to Canada
Tax liability is the most significant disadvantage.
You could incur an overseas transfer charge of 25%, payable in full at the time of transfer to HMRC
Alternatively, depending on your income tax banding in Canada, you could have a large tax bill from the Canadian authorities
Moving your tax residency from Canada within the first 5 years means you will not be recognized as a transfer. As a result, you will owe a 25% tax charge.
The combination of Canadian income tax, foreign tax credits, and the tax treatment of a foreign pension scheme at source is complex. Extensive tax advice is required and can be expensive.
You will need to convert your total pension from GBP to CAD$ in one go. This means you are susceptible to the exchange rates at the time of transfer.
Limited options of RRSP's / QROPS to receive the transfer of your UK pension scheme
Should you return to the UK or leave Canada, you will need to transfer your pension again
International SIPP Canada
An alternative and often more suitable option is an International SIPP. A UK pension that's been created for non-UK residents.
Benefits of an International SIPP include:
It's a non-taxable event when transferring to the new pension scheme.
Ability to invest and withdraw in Canadian dollars.
Receive financial advice on product selection and asset allocation in line with your needs.
Gain access to a wider range of investments.
Make pension withdrawals as and when required. As such, not entering higher tax bands unnecessarily.
Take your 25% PCLS Pension Commencement Lump Sum free of UK tax. Should it be deemed beneficial, you can pay this into your RRSP.
Thanks to the double-taxation agreement, via an NT code, receive all income payments gross of UK tax.
Expat Financial Advice with The Wealth Genesis
The market is complex and fluid with the accepted Recognised Overseas Pension Schemes constantly changing. The penalty for transferring to a non-qualifying scheme is 40% tax. As such, taking expat financial advice and/or expert tax advice is highly recommended.
At The Wealth Genesis, we begin with a discovery meeting to understand what drives you. We then conduct an in-depth analysis of your existing assets and priorities.
We consider all the products in the market to provide the best advice in your circumstances. We provide a bespoke Wealth Planning report tailored to your priorities including product selection and fund range covering total costs both initially and ongoing.
Once the transfer has been completed, we work with you through every step of your journey, with reviews each quarter to ensure your assets are delivering for your future well-being. To get started with us, schedule a consultation using the button below.
FAQs
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We are the first advice firm to charge the same flat-fee to all our clients, regardless of their circumstances or pension values.
Our fees are a £3,000 initial transfer fee and 0.85% ongoing per annum.
This is the total cost of transferring one pension or consolidating many to an International SIPP. -
Following the guidelines listed above in the advice process, once you have confirmed you wish to proceed, the process is as follows:
Submit an LOA to your existing scheme. This allows us to liaise with them on your behalf throughout the transfer. Note it doesn't allow us to alter the policy in any way.
Complete the transfer paperwork including your new International SIPP application.
If your existing provider is on the Origo system (secure electronic UK pension transfer payment system) Your pension can be sent in up to 21 working days.
Often, you will need to book an appointment and speak to Moneyhelper. The free and impartial UK Government service for pension guidance.
Following evidence of the call taking place, via a code, which is to be provided to your existing scheme. The transfer can be made.
The whole process takes 1 - 3 months. Once the money is received by your new scheme, we can arrange a call to reconfirm your position hasn't changed and move ahead with allocating the money to the chosen investments.
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There are various International SIPP options on the market.
We currently believe the best option is the Novia Global SIPP, both from a cost and servicing perspective.
