Chancey

Does anyone have any advice on private pensions. We both had pensions back in the UK and have been in Canada nealy 3 years. One advisor said its best to leave it in the UK until you retire and someone we know is transferring theirs over to Canada as they were advised it was the best option. Both are final salary schemes, we have 20 years before we can retire. Any advice would be appreciated.

The Chancey's

el_richo

I'd go with the advice of a professional financial advisor as you can give them the full details

My personal situation has me leaving one pension in the UK and transferring another private one.

Atlantic Xpat

In a similar(ish) position to you, I have thus far chosen to leave my two final salary pension schemes in the UK. That has been driven by exchange rates, value of of the pension pot (which I'm sure has diminished greatly with the stockmarket downturn since I last got a transfer figure.) and the thought that who knows where I will be living in 20 years time.

If you search on this here website there has been much debate on pension transfers. Some (and some of those are professional pension advisors who may or may not declare an interest) would advise transferring. Others would not.

gryphea

Whislt trnasferring may be worthwhile at better exchange rates, I really can't believe now is a good time to transfer?

el_richo

I don't have a final salary pension (Boooooo) but out of curiosity, if you transfer to another provider or country, are you still eligible for it? How would it work?

Tangram

It would be based on your final salary at leaving date.

Atlantic Xpat

My options as I understand them are:

1. Leave the pension(s) in the UK. At retirement age they will pay me GBP X. If I am still living in Canada at that time I transfer X monthly and live with the exchange rate risks & fees.
2. Transfer the pension 'bucket' as a lump sum. This has to be to a QROPS recognised scheme in Canada and goes into a 'Locked in' Fund. I must confess to not knowing exactly what locked in means.

Last time I looked at transferring the larger of my two pensions. (the one from 11 years service at a certain car company) the value was GBP X as a lump sum vs GBP Y as an annual income. Y is linked to RPI until I retire so the FV of Y should be reasonably close to its current value. I didn't transfer X and in the intervenining 3 years the exchange rate has fallen from $2 to $1.6 and I imagine (but haven't checked) that the value of the lump sum has fallen due to the stock market decline. (although perhaps it has come back a bit from its lowest point.)

If I go with option 1) my eventual retirement income will consist of a portion from the two pension schemes in the UK paid in GBP, plus an amount from the RRSP's I've been contributing to here. Plus of course federal pension in Canada and 14 years worth of UK state pension if that still exists in 25 years time.

Atlantic Xpat

Yes thats correct. When I left the company in 2002 I received a statement telling me it will pay me an amount when I reach retirement age. That amount increases with RPI or 5% whichever is lower until that point.

el_richo

Nice. I always assumed final salary pensions were based on time served and/or accrual rate so if somebody left after a few years they'd only be eligible for a % of salary at leaving date. That said, i'm a pension retard so i'm only guessing.

el_richo

Lucky bugger

Alan2005

You guys think your pensions schemes are going to pay out?

Tangram

Mine will I hope as I have transferred everything into RRSPs unlocked and appear to have recovered their dip, but who knows what the future holds.

Alan2005

I have several private pensions. I hope they pay out - but I'm not relying on it. Unfunded pensions are going to be a big problem - especially if interest rates stay where they are for another 10 or 20 years (which they might).

el_richo

Who'd have thunk retiring would be so complicated. Sounds like it's a risk whatever you choose but hopefully it works out.

I'm also not relying on it. We were hoping our London property would help us out when we retire at 78 y/o but these days, i'm not relying on that either.

To add to this our parents potential to live longer, we're screwed

JonboyE

^^^

Has to be the best advice. The only caveat is that a professional financial advisor has a financial interest in your pension. It is always good to understand how they are going to earn from the advice they give. In the UK I much prefer to pay a fee for service rather than be commission based. That option does not seem to be generally available in Canada.

Keeping pension funds in both countries can act as a hedge against one economy outperforming the other. If you have a long time to retirement that is probably not a bad idea. However, as you get nearer to collecting your pension the flexibility offered by the RRSP/RIFF rules seems very attractive compared to the options available in the UK.

I have a modest amount in a private money purchase scheme in the UK. On retirement (which is getting close enough to start thinking about seriously) I will have to buy an annuity with the capital value. Annuity rates suck. I can shop around but even the very best rates suck. There is a little flexibility in that, in addition to a flat rate annuity based on my life, I could chose one that rises with inflation, or one that continues to pay to my OH after my death. If the rates for a straight annuity suck the rates for these options will make you weep.

In contrast you do not have to withdraw funds from an RRSP until you chose to do so, therefore there are plenty of opportunities to do some tax planning. At 71 years old you have to collapse the RRSP but you can transfer to a RIFF which protects the funds' tax exempt status. Although you must bring the value of the RIFF into your taxable income in stages over 15 years you have deferred some of the tax into your 90s when you are unlikely have much other income.

The other big advantage of an RRSP/RIFF is that if you die the funds roll over to your spouse tax free. With a straight annuity if you walk under a bus at aged 60 + one day then you retirement saving are lost forever.

Hopefully the exchange rate will improve a bit over the next few years and this will make it more attractive to bring the funds over. Also, there is a cost to do this. About 3% of the total funds IIRC.