Go Back  British Expats > Living & Moving Abroad > Canada
Reload this Page >

Private pensions

Private pensions

Old Oct 16th 2010, 11:48 pm
  #46  
Forum Regular
 
Joined: Mar 2007
Location: Sechelt, Sunshine Coast. BC
Posts: 134
Spoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the rough
Default Re: Private pensions

Originally Posted by mjwalker007
I agree, although not essential, I believe it is important to speak to someone that has had experience and knowledge of both U.K pensions and RRSP/RIF . With regards to the rules of QROPS, again , there are some very important rules that need to be followed otherwise there could be potential tax penalties if not followed correctly. These rules are very clear from the HMRC so there should not be any problems as long as the rules are adhered to and the client is fully aware of them.

With regards to the merits of switching your final salary pension from the U.K to a Canadian RRSP, there is really no right or wrong answer. It is purely down to the individual and their specific circumstances.

There are benefits to keeping it in the U.K and there are also disadvantages.

The major advantage of a final salary scheme is the income for life option that this will provide. Also many people like the idea that the pension fund isnt 'invested' like a money purchase scheme.

The disadvantages of retiring in Canada and keeping this type of pension in the U.K is that although the income is stable and may rise into retirement, this will not be the case if you want to receive the income whilst in Canada. Every month the income is paid you will be at the mercy of exchange rates. this could work for you or against you. Many people that have retired over the last couple of years in Canada, and have a U.K pension income, have seen the level of their income drop dramatically due to the exchange rate. This is something that they have no control over whatsoever. The whole idea of a pension into retirement is to provide you with a regular , stable, income, although this has not happened for many retirees due to the fact that the pension income originates from the U.K .

Obviously by transferring your pension to a QROPS there will be an exchange rate conversion at that time, but once you do retire in Canada, the income will be in Canadian dollars, therefore providing you with the stable, regular income into retirement.

The U.K Govt is now also targeting public sector pension schemes as a way to save money and reduce the growth of these types of pensions.
Public sector pension funds will now increase in line with CPI ( consumer price index ) instead of RPI ( retail price index ) . This will have an impact on peoples pension funds as CPI has historically been lower than RPI , meaning the prospect of lower growth and smaller pension funds in the future.

There can also be major differences on death when it comes to final salary schemes in the U.K as opposed to RRSP/RIF in Canada.

It is important to look at every pension on its own merits, as what might be good for one person to transfer their pension fund, might not be right for another. This is why it is important to know all of the facts before making an informed decision on moving your pension from the U.K to Canada.

As has been discussed, there are good options when moving your pension funds to Canada, both guaranteed income for life options and not. Only once you can discuss the available options, and find out what really is suited for yourself and retirement goals, based on factors such as your age , risk, years until retirement etc can you make a decision that is right for you.
I dont disagree with any of the above. However going back to the initial question on the forum. This related specifically to the transfer of a Final Salary Pension. Its worth noting that most reputable companies in the UK won't recommend a transfer out of a final salary scheme unless the scheme itself looks as if it may be in jeopardy or the requirement of death benefit is of primary concern. There is one very reputable company I know of who charge a fee to do the analysis and openly state that only in very rare circumstances do they believe a transfer will form part of their recommendation.

The cash value offered in Final salary schemes for transfer will invariably require a high investment return to match the benefits being given up. It is also in a schemes interest for people to leave or commute part to a Tax Free Lump Sum as this relinquishes the scheme from its long term income liability.

With regards to currency risk, you choose to take the risk in one go by transferring now, or taking regular income over 20 to 30 years ultimately achieving the average over that period. You may need to consider whether or not variable icome is an issue. This also begs the question, if your in your 40's for instance, why take a transfer value now. you most likely have 20 years + to make that decision.

You only have to look at an Annuity rate which has say a 10 year guarantee and indexing, plus a 50% spouse guarantee to appreciate the size of the fund required.

In summary, the reason final salary schemes are so expensive and so many are closing their doors to new members is because no other type of pension comes close to matching them.
Spoons1961 is offline  
Old Oct 17th 2010, 12:56 am
  #47  
BE Enthusiast
 
mjwalker007's Avatar
 
Joined: Feb 2008
Location: British Columbia, Canada
Posts: 428
mjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond reputemjwalker007 has a reputation beyond repute
Default Re: Private pensions

Originally Posted by Spoons1961
I dont disagree with any of the above. However going back to the initial question on the forum. This related specifically to the transfer of a Final Salary Pension. Its worth noting that most reputable companies in the UK won't recommend a transfer out of a final salary scheme unless the scheme itself looks as if it may be in jeopardy or the requirement of death benefit is of primary concern. There is one very reputable company I know of who charge a fee to do the analysis and openly state that only in very rare circumstances do they believe a transfer will form part of their recommendation.

The cash value offered in Final salary schemes for transfer will invariably require a high investment return to match the benefits being given up. It is also in a schemes interest for people to leave or commute part to a Tax Free Lump Sum as this relinquishes the scheme from its long term income liability.

With regards to currency risk, you choose to take the risk in one go by transferring now, or taking regular income over 20 to 30 years ultimately achieving the average over that period. You may need to consider whether or not variable icome is an issue. This also begs the question, if your in your 40's for instance, why take a transfer value now. you most likely have 20 years + to make that decision.

You only have to look at an Annuity rate which has say a 10 year guarantee and indexing, plus a 50% spouse guarantee to appreciate the size of the fund required.

In summary, the reason final salary schemes are so expensive and so many are closing their doors to new members is because no other type of pension comes close to matching them.

Your quite right, final salary schemes are one the best schemes to be a part of ............if you are still an active member of that scheme when you retire at your highest salary !!

The comparisons may not be so good for deferred members who may be still a while off retirement, and will find that there deferred pension fund may only be growing around 2-3% per year. As mentioned , especially the public sector pensions that are going to be hit hard by the reforms the Conservative government have made.

Also the issue of death is of great importance. How many members of these schemes know that if they were to die, even one day after taking retirement, their spouse could lose half of the pension income overnight.

Again, if you live into your 90s etc , these are great schemes, but very little flexibility for beneficiaries if you die soon after taking the pension income.

The currency risk is very real. Unfortunately I have had many clients that have contacted me asking is there anything that can possibly be done as their pension income in some instances has halved because they are receiving it from a U.K Pension. People are experiencing this now, this is a very real problem, and one which they are unable to do anything about.Yes exchange rates can reverse in the future, but it is the here and now income that these people are struggling with.The whole idea of a pension income is for it not to decrease into retirement, quite the opposite !!!

In regards to why make the transfer in the near future and not wait twenty years. Before the election and before Conservatives took power, one area they were unhappy about and had discussed was QROPS. They felt it was unfair that people who had left the U.K could transfer their pension funds out of the U.K without any tax liability via QROPS. They said this was costing the U.K millions of pounds per day. You only need to look at what the Conservatives have done to pensions in their short time in office and the reforms they are looking to implement, to suppose that QROPS at some stage will be looked at. If the rules do change at some stage in the future, the opportunity to have moved the pension out of the U.K, without any tax liability , could be lost.

The points that you make are very valid points, but as someone that has had three final salary schemes in the U.K , and a wife that had an NHS final salary scheme, after careful consideration, I am very happy that we decided to switch these pension funds to Canada and take control of our retirement savings. This may not be for everybody, but it was the right thing for us.
mjwalker007 is offline  
Old Oct 17th 2010, 9:08 pm
  #48  
Forum Regular
 
Joined: Mar 2007
Location: Sechelt, Sunshine Coast. BC
Posts: 134
Spoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the rough
Default Re: Private pensions

Originally Posted by mjwalker007
Your quite right, final salary schemes are one the best schemes to be a part of ............if you are still an active member of that scheme when you retire at your highest salary !!

The comparisons may not be so good for deferred members who may be still a while off retirement, and will find that there deferred pension fund may only be growing around 2-3% per year. As mentioned , especially the public sector pensions that are going to be hit hard by the reforms the Conservative government have made.

Also the issue of death is of great importance. How many members of these schemes know that if they were to die, even one day after taking retirement, their spouse could lose half of the pension income overnight.

Again, if you live into your 90s etc , these are great schemes, but very little flexibility for beneficiaries if you die soon after taking the pension income.

The currency risk is very real. Unfortunately I have had many clients that have contacted me asking is there anything that can possibly be done as their pension income in some instances has halved because they are receiving it from a U.K Pension. People are experiencing this now, this is a very real problem, and one which they are unable to do anything about.Yes exchange rates can reverse in the future, but it is the here and now income that these people are struggling with.The whole idea of a pension income is for it not to decrease into retirement, quite the opposite !!!

In regards to why make the transfer in the near future and not wait twenty years. Before the election and before Conservatives took power, one area they were unhappy about and had discussed was QROPS. They felt it was unfair that people who had left the U.K could transfer their pension funds out of the U.K without any tax liability via QROPS. They said this was costing the U.K millions of pounds per day. You only need to look at what the Conservatives have done to pensions in their short time in office and the reforms they are looking to implement, to suppose that QROPS at some stage will be looked at. If the rules do change at some stage in the future, the opportunity to have moved the pension out of the U.K, without any tax liability , could be lost.

The points that you make are very valid points, but as someone that has had three final salary schemes in the U.K , and a wife that had an NHS final salary scheme, after careful consideration, I am very happy that we decided to switch these pension funds to Canada and take control of our retirement savings. This may not be for everybody, but it was the right thing for us.
Fair points, although unless you need to take your pension now, I really don't think its the right time to transfer. The exchange rate is particularly poor at the moment. European currencies are weak and the Canadian dollar is very strong. This is not necessarily a good thing for Canada, but with interest rates being so low, they have very little control. Figures in the US are showing themselves to be worse than forecast as the economic stimulus has not had the desired effect so far.

Whilst there is no guarantee of the UK/ CAD exchange rate getting better in the short term. The vast majority of analysts expect it to over time, hence the surge in Global Bond and Global Dividend funds in Canada.

I'm not suggesting we will get back into the realms of 2.3 dollars to the pound, but even a modest increase to 1.80 is an increase of 13%. This would make a huge difference to the value of most Pension Funds when they are brought over.
Spoons1961 is offline  
Old Oct 18th 2010, 1:40 am
  #49  
Born again atheist
 
Novocastrian's Avatar
 
Joined: Jul 2005
Location: Europe (to be specified).
Posts: 30,259
Novocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond reputeNovocastrian has a reputation beyond repute
Default Re: Private pensions

Originally Posted by Spoons1961
Fair points, although unless you need to take your pension now, I really don't think its the right time to transfer. The exchange rate is particularly poor at the moment. European currencies are weak and the Canadian dollar is very strong. This is not necessarily a good thing for Canada, but with interest rates being so low, they have very little control. Figures in the US are showing themselves to be worse than forecast as the economic stimulus has not had the desired effect so far.
For reasons that many already know, I tend to follow the CAD/euro rate with interest. CAD is down ~12% since its last high about three months ago.

PS. You seem to know what you're talking about in this area. Where are you located at the moment? PM is fine.
Novocastrian is offline  
Old Oct 18th 2010, 2:36 am
  #50  
 
Joined: Aug 2005
Posts: 14,227
Alan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond reputeAlan2005 has a reputation beyond repute
Default Re: Private pensions

Originally Posted by Spoons1961
European currencies are weak and the Canadian dollar is very strong. This is not necessarily a good thing for Canada, but with interest rates being so low, they have very little control. Figures in the US are showing themselves to be worse than forecast as the economic stimulus has not had the desired effect so far.
Not by me. I knew they were going to be bad and they are going to get worse. Ben is about to do another set of money printing because it worked so well the previous times. Viva le recovery... idiots.
Alan2005 is offline  
Old Oct 18th 2010, 3:58 am
  #51  
Forum Regular
 
Joined: Mar 2007
Location: Sechelt, Sunshine Coast. BC
Posts: 134
Spoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the rough
Default Re: Private pensions

Originally Posted by Novocastrian
For reasons that many already know, I tend to follow the CAD/euro rate with interest. CAD is down ~12% since its last high about three months ago.

PS. You seem to know what you're talking about in this area. Where are you located at the moment? PM is fine.
Sunshine Coast, near Vancouver in BC. Been here two years now.
Spoons1961 is offline  
Old Oct 18th 2010, 5:26 am
  #52  
Binned by Muderators
 
Joined: Jul 2007
Location: White Rock BC
Posts: 11,682
JonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond reputeJonboyE has a reputation beyond repute
Default Re: Private pensions

Originally Posted by Spoons1961
Sunshine Coast, near Vancouver in BC. Been here two years now.
My pension fund is mostly a chunk of real estate in Roberts Creek.
JonboyE is offline  
Old Oct 18th 2010, 10:42 am
  #53  
Slightly Canadian
 
Atlantic Xpat's Avatar
 
Joined: Jul 2005
Location: St. John's, Newfoundland
Posts: 10,127
Atlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond reputeAtlantic Xpat has a reputation beyond repute
Default Re: Private pensions

Originally Posted by Spoons1961
Fair points, although unless you need to take your pension now, I really don't think its the right time to transfer. The exchange rate is particularly poor at the moment. European currencies are weak and the Canadian dollar is very strong. This is not necessarily a good thing for Canada, but with interest rates being so low, they have very little control. Figures in the US are showing themselves to be worse than forecast as the economic stimulus has not had the desired effect so far.

Whilst there is no guarantee of the UK/ CAD exchange rate getting better in the short term. The vast majority of analysts expect it to over time, hence the surge in Global Bond and Global Dividend funds in Canada.

I'm not suggesting we will get back into the realms of 2.3 dollars to the pound, but even a modest increase to 1.80 is an increase of 13%. This would make a huge difference to the value of most Pension Funds when they are brought over.
All of the forgoing is why I am leaving my two Final Salary schemes (representing 11 years service with one employer and 3 with another) in the UK for the moment. I am 20+ years from retirement.
Atlantic Xpat is offline  
Old Oct 18th 2010, 6:27 pm
  #54  
Forum Regular
 
Joined: Mar 2007
Location: Sechelt, Sunshine Coast. BC
Posts: 134
Spoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the roughSpoons1961 is a jewel in the rough
Default Re: Private pensions

Originally Posted by JonboyE
My pension fund is mostly a chunk of real estate in Roberts Creek.
Nice spot. I know it well. Can't afford to live there.
Spoons1961 is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service -

Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.