Transfer UK Private Pension to Canada
Have you worked in the UK and hold a UK Private Pension you wish to transfer to Canada? Are you a Canadian Resident with old legacy pensions you now wish to consolidate?
Within this article, we look at the options available to Canadian residents with UK Pensions, factors to consider, costs and who to contact.
UK Private Pension
Any UK pension scheme falls under UK legislation and as such a strict process has to be adhered to when either transferring, withdrawing, encashing or general management. Although this can be tedious at times, it is there to protect the members and does so efficiently. If you wish to transfer out of a UK scheme, whether it is defined benefit or defined contribution it can only be to another recognised scheme by customs HMRC. Under the Pension Freedoms Act of 2015 from age 55, you can access your pension monies, 25% of which is tax-free (in the UK) known formerly as Pension Commencement Lump Sum. UK pension plans have been specifically set up for UK residents, as such certain restrictions apply to those who no longer reside in the UK.
Different pension providers’ restrictions vary, often the age of the pension plays a key part. Therefore if your intention is simply to access your monies and withdraw from age 55 you may be able to do this without transferring and incurring any cost. By contacting your existing scheme this can be answered swiftly and easily.
UK Pension Transfer Canada
As previously mentioned all UK pension transfer can only be actioned to another recognised scheme. The 2 options are:
QROPS – Qualifying Recognised Overseas Pension Scheme
These have received a lot of air time in the past and were often mis-sold for potential tax benefits and so advisers could make a commission by recommending unregulated funds. Currently, if you were to utilise a QROPS the best option would a Maltese based one due to the high number of double taxation agreements in place, allowing pensions to be paid out gross. As of March 2017 however, the UK Government introduced an Overseas Transfer Charge (OTC) meaning anyone who resides outside of the European Economic Area utilising a QROPS would incur a 25% charge on the total value of their pension. On this basis, a Maltese QROPS for a Canadian resident is not a viable option.
Previously members could transfer into a Canadian QROPS however their QROPS status is now delisted as they were deemed to not be similar enough in structure and use. You can therefore no longer directly transfer a UK pension to Canada. Any institution or advisory who states otherwise is incorrect or misselling a product for something it is not. There are, however, options to encash a UK pension and either contribute the monies into an RRSP or directly into a bank account but this would incur the relevant tax liabilities depending on the value and your tax status.
International SIPP for a Canadian Resident
When the “International SIPP” was first introduced to the market 5 years ago it solved a big issue. What are you meant to do if you have a UK pension, do not live in the UK, require access, multi-currency and investments managed but do not want to transfer out of UK regulation? (Since 2017 as discussed outside EEA incurs OTC 25%) The “International ” part of the SIPP is very much a branding exercise, for all intensive purposes, it is a UK SIPP, regulated in the UK via the Financial Conduct Authority FCA. This offers the key benefit of security with the UK regulator being considered the benchmark for financial institutions. Because it has been specifically created for those who reside offshore it enables the member to:
- access their funds from age 55,
- hold multicurrency including CAD $
- Select a specialist offshore adviser to manage pension funds accordingly
- Ensure your UK assets complement those as part of your plan in Canada
- Make withdrawals in Canadian dollars
- Access on an Adhoc basis or regular withdrawals
- Consolidate a number of UK pensions
- Encash the lot and transfer to an RRSP or bank account – tax charge applicable
Costs will vary for any transfer depending on the products, providers and the financial advisory firm used.
You can view a cost comparison for all the current International SIPP’s on the market here.
Questions to ask any financial adviser you are thinking of entrusting your financial future to?
When choosing a financial adviser there are always some key questions to be asking that can help determine if they are of the right caliber:
1. Are you fee-based or commission-based?
2. Does the product or fund that you are recommending have an exit penalty?
3. Where are you regulated?
4. What are the initial and ongoing product charges?
5. Do you have customer testimonials? or an independent rating of your companies service standards from Trustpilot or Feefo?
Where do I start?
Hopefully, the above information has been useful and gives a clear indicator of the options available. The next step will be to speak to a regulated financial adviser who can assist find out your exact requirements and assist you accordingly.