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Old Apr 5th 2017, 12:11 am   #1
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Default Cashing in final salary pension.

Hi all - I'm wondering if anyone can help me?

My wife and I (both living in Canada now for 6 years) have just got cash in values for our final salary pensions.

This is something we never though we'd consider but the cash in values are crazy high at the moment!!

My question is can we cash them in and reinvest in a pension fund back in the U.K, or do we have to bring the money here (as that's where we're tax resident) and invest in an RRSP.

Ideally I'd like to keep the funds in the U.K until the exchange rate is better.

Thanks in advance.

Stuart.
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Old Apr 5th 2017, 12:39 am   #2
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Default Re: Cashing in final salary pension.

I've just read about the QROPS (or lack of in Canada). So I guess keeping it in the U.K is the only option?
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Old Apr 5th 2017, 7:22 pm   #3
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Default Re: Cashing in final salary pension.

The only option now is to transfer it to a UK SIPP and sit on it, this will allow you to get the cash transfer value currently on offer. Some Final salary providers are offering up to 40 times the current annual pension you will receive at retirement.

My current goal is to transfer my final salary pension to a UK SIPP hold it 50% CAD 50% GBP funds. I have started the process off, transfer paperwork complete.

It is not easy to do a lot of UK SIPP providers are not interested in dealing with Non UK residents. Most of the companies want a fee for the service which is normally around 1500-2000 GBP. The funds generally need to stay with the sipp provider for at least 10 years or penalties will occur.

I will see how my transfer turns out before providing an update.
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Old Apr 5th 2017, 7:57 pm   #4
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Default Re: Cashing in final salary pension.

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Originally Posted by scottymallo View Post
The funds generally need to stay with the sipp provider for at least 10 years or penalties will occur.

I will see how my transfer turns out before providing an update.
A UK SIPP platform has no exit fees.
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Old Apr 5th 2017, 8:30 pm   #5
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Default Re: Cashing in final salary pension.

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A UK SIPP platform has no exit fees.
The UK sipp doesn't have exit fees but the bond fund i am using to manage my investments in the sipp does
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Old Apr 5th 2017, 9:26 pm   #6
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Default Re: Cashing in final salary pension.

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Originally Posted by scottymallo View Post
The only option now is to transfer it to a UK SIPP and sit on it, this will allow you to get the cash transfer value currently on offer. Some Final salary providers are offering up to 40 times the current annual pension you will receive at retirement.

My current goal is to transfer my final salary pension to a UK SIPP hold it 50% CAD 50% GBP funds. I have started the process off, transfer paperwork complete.

It is not easy to do a lot of UK SIPP providers are not interested in dealing with Non UK residents. Most of the companies want a fee for the service which is normally around 1500-2000 GBP. The funds generally need to stay with the sipp provider for at least 10 years or penalties will occur.

I will see how my transfer turns out before providing an update.
Excellent thanks, my final Salary was 28.5 times (6 months ago) and my wife got her value yesterday at 42 x annual pension!!

It's a no brainer to cash these in I think!!
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Old Apr 5th 2017, 9:32 pm   #7
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Default Re: Cashing in final salary pension.

Rates are great I had 30* annual pension last Jan, 40* this feb, no brainer.
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Old Apr 5th 2017, 9:35 pm   #8
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Default Re: Cashing in final salary pension.

What are the tax consequences of doing this both from a UK perspective and a Canadian one?
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Old Apr 5th 2017, 10:16 pm   #9
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Default Re: Cashing in final salary pension.

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What are the tax consequences of doing this both from a UK perspective and a Canadian one?
I have no idea at this stage, certainly something I'll look into prior to cashing in.

I'm assuming there are no tax implications until you start to draw the pension at which stage you'd pay tax (again assuming in the country you're tax resident)??
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Old Apr 5th 2017, 10:53 pm   #10
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Default Re: Cashing in final salary pension.

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Originally Posted by stokesey View Post
I'm assuming there are no tax implications until you start to draw the pension at which stage you'd pay tax (again assuming in the country you're tax resident)??
Cashing in a pension fund, once outside of a protected fund, if you are a Canadian tax resident, it becomes reportable income no matter what country it is in. Once you receive the funds, holding GBP and waiting for an improvement in the FX, there is also a potential CGT liability on the capital gain. If over $100kCAD, look into whether you need to file a T1135. Failing to do so, when you should be doing so can get expensive. I would be talking to an accountant who knows your Canadian financial position and can advise.
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Old Apr 5th 2017, 11:36 pm   #11
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Default Re: Cashing in final salary pension.

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Originally Posted by Aviator View Post
Cashing in a pension fund, once outside of a protected fund, if you are a Canadian tax resident, it becomes reportable income no matter what country it is in. Once you receive the funds, holding GBP and waiting for an improvement in the FX, there is also a potential CGT liability on the capital gain. If over $100kCAD, look into whether you need to file a T1135. Failing to do so, when you should be doing so can get expensive. I would be talking to an accountant who knows your Canadian financial position and can advise.
That is what I thought would happen and I was surprised that no one had mentioned it.
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Old Apr 5th 2017, 11:37 pm   #12
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Default Re: Cashing in final salary pension.

Quote:
Originally Posted by Aviator View Post
Cashing in a pension fund, once outside of a protected fund, if you are a Canadian tax resident, it becomes reportable income no matter what country it is in. Once you receive the funds, holding GBP and waiting for an improvement in the FX, there is also a potential CGT liability on the capital gain. If over $100kCAD, look into whether you need to file a T1135. Failing to do so, when you should be doing so can get expensive. I would be talking to an accountant who knows your Canadian financial position and can advise.
I absolutely hear what you're saying, although I'm not sure if this would qualify as 'cashing in a pension fund' as the U.K. government rules say you can't do this (until age 55 without huge tax implications).

I'd be switching from a final salary scheme into another approved pension scheme, so effectively I will never have the money in my hand, my understanding from the pension fund is that it will only be released to another approved scheme.

So really it's no different to moving a pension fund to Canada (which obviously we can't do now as there are no QROPS approved organizations in Canada)?
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Last edited by stokesey; Apr 5th 2017 at 11:40 pm.
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Old Apr 6th 2017, 12:38 am   #13
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Default Re: Cashing in final salary pension.

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I'd be switching from a final salary scheme into another approved pension scheme, so effectively I will never have the money in my hand, my understanding from the pension fund is that it will only be released to another approved scheme.
You may be right. What matters though if living in Canada, is CRAs determination on this. UK rules as far as Canadian tax go are irrelevant to Canadian tax payers. The pension fund would have no idea about Canadian tax implications.

There are a number of schemes and payouts in the UK that are deemed protected, or tax free, that CRA will tax.

If it were me, I would get Canadian tax accountant before doing anything. Once the deal is done, it is too late.
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Old Apr 6th 2017, 12:41 am   #14
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Default Re: Cashing in final salary pension.

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Originally Posted by Aviator View Post
You may be right. What matters though if living in Canada, is CRAs determination on this. UK rules as far as Canadian tax go are irrelevant to Canadian tax payers. The pension fund would have no idea about Canadian tax implications.

There are a number of schemes and payouts in the UK that are deemed protected, or tax free, that CRA will tax.

If it were me, I would get Canadian tax accountant before doing anything. Once the deal is done, it is too late.
I most certainly will. Thanks 👍🏼
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Old Apr 6th 2017, 12:50 am   #15
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Default Re: Cashing in final salary pension.

As far as I can see nothing changes regarding any tax implications. Transferring from a UK final salary to a UK sipp. The same tax rules will apply you would pay tax in Canada on your UK drawn sipp pension if at the time you are a tax resident of Canada. This would be treated as world wide income. You are not a tax resident of the UK and hence no tax would be owed to hmrc. As the pension would be UK based you cannot access it before age 55. Therefore there are no UK penalties to worry about for access to the funds before turning 55.
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