UK Pension Transfers
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UK Pension Transfers to Canada
Whether you are one of the hundreds of thousands of British expats that call Canada home or are a Canadian that has built up a pension after years of working in the UK, you now have the ability to transfer your UK pension to a Canadian RRSP.
To move your pension without incurring tax charges, you’ll need to transfer it to a QROPS (Qualifying Recognized Overseas Pension Scheme) in Canada normally within an RRSP (Registered Retired Savings Plan).
The process is usually broken down into three simple steps:
- An interview process will be initiated to understand your situation and determine if it would be beneficial for you to move forward with transferring your UK pension to a Canadian RRSP. You’ll also be sent a “request for information” form to request relevant information from the UK pension provider on your behalf.
- If it is indeed in your best interest to transfer your pension, and both parties agree to move forward, authority letters will be sent to the UK pension provider to request current transfer values and the forms needed to transfer the funds.
- Once the paperwork is received and a client is ready to proceed, the final paperwork will be drawn up so that the transferred funds are received directly into the relevant Canadian RRSP.
Are there advantages to transferring my UK pension to Canada?
There are a variety of advantages to moving your UK pension over. These include:
Typically, you are not charged for the pension transfer process. We will instead receive remuneration from the RRSP provider of the Canadian plan.
By moving your UK pension over to a QROPS Canadian RRSP, at retirement, your pension will be paid in Canadian dollars. This avoids a fluctuating exchange rate and its effect on incomes from pensions remaining in the UK.
While most pension funds allow for little choice regarding how funds are invested, you can create a portfolio that suits your needs/level of risk.
Flexible retirement income options
Most pension plans require you to start drawing out your money on a fixed date (typically from age 55 on). Transferring your pension to Canada will give you more options to provide for more flexibility on the amount of income you will receive when you retire.
No liability on UK tax-to-pension income
When you transfer to a QROPS pension income will only be taxable in the country of residence. UK pension rights transferred to a QROPS take them outside of any IHT tax charge levied on death for pension lump sums over the age of 75.
Automatic spousal rollover
In the UK, most company pension schemes will pay only half of the original pension income on death, meaning your beneficiaries could lose up to 50% of the pension. If your money is in a Canadian RRSP, however, on death the full value of the pension is transferred to the surviving spouse tax-free. The tax will eventually be paid from the estate when the spouse passes on. The remainder will be available for any beneficiaries.
Is moving my UK pension to Canada right for me?
While there are a lot of advantages to moving your UK pension to a Canadian RRSP, every situation is different, and what makes sense for one person may not be right for another.
For example, while it’s almost always in your best interest to move over your pension, some older plans have benefits such as guaranteed annuity rates that were set when interest rates were much higher than they are today. In these rare instances, it’s better to leave your pension in the UK. However, it’s important to have individuals well-versed in UK pensions to look into your unique case to discuss the best option for you.
When you’re ready to move your UK pension to a Canadian RRSP, or if you have questions about your UK pension, contact us to discuss your options.
A QROPS can be appropriate for Ex Pats who have left the UK to emigrate permanently and intend to retire abroad and have either Personal or Company pension benefits built up in a UK pension fund.
A registered retirement savings plan (RRSP), or retirement savings plan (RSP), is a Canadian pensions savings account used for holding savings and investment assets in a tax advantageous manner.