sranauta

Hello
My first post here

After much red tape finally managed to get my UK pension from a private company tranferred to a CIBC Investor Services Inc. Self-directed Retirement Savings Plan.

I was hoping to do a mortgage within this RRSP to purchase a rental property (essentially lending myself my own money) but I was told I can't do that.

I am also considering moving to a credit union but I was told I can't move the funds to an ordinary RRSP - it has to be a QROPS approved account wghich teh credit union does not provide.

I need to get hold of the exact regulations regarding this as to what I can and can't do with this account.

Can any one help please?

Thanks

Ramsey

You are limited by the UK-side rules AND by RRSP rules.

Your funds are restricted for 5yrs from the day you left the UK.... Once you have been out of the UK for 5yrs you can then move your money however you feel fit.

The First-time homebuyers plan (HBP) allows you to withdraw upto $25K from your RRSP without penalty for your first home here in Canada.... But you have to live in it.... And pay it back over 15yrs.

Once you beat the 5yr rule, you can always withdraw your RRSP funds, but that would be subject to Income tax.

Of course, this also assumes you found a non locked-in RRSP.... If the RRSP is locked-in, you are subject to those rules too...

Almost Canadian

The 5 year rule was recently increased to 10 years

sranauta

Hello Ramsey,

Thanks for your reply.
Actually we left UK and have been in Canada as permanent residents 16 years ago.
Does that fill the 5 year requirement or does the 5 years start when the funds arrive in Canada?

Can you confirm that there are no restrictions about moving the funds to another bank or credit union's RRSP.

Where would I look up the regulation for this?


Thanks

Ramsey

Well AC has just mentioned it's now a 10yr rule!!.... Thankfully I moved my cash when I did!!

The rule is based on when you permanently left the UK. The local bank will probably be cautious for 5yrs at least after receiving the funds.... I had to fill out a form stating the date I left the UK in order to use my funds for the HBP.


You can transfer your RRSP from one institution to another if there are no other restrictions.... i.e. UK or Locked-in provisions.

p.s..... I'm no expert, I used my UK pension to fund my HBP a couple of years ago.

JonboyE

This sort of question should be put to someone who knows what they are talking about. As mentioned above, the rules changed quite recently and even before then many financial advisers in Canada did not understand them.

Licenses are provincial so where do you live?

sranauta

Hello JonboyE
I am in Alberta.
Thanks for pointing out that this needs to be answered by someone who knows detail.
"The 5 year rule was recently increased to 10 years" may be information but a tongue sticking out icon does not inspire confidence in the writer.

Tangram

Speak to a qualified financial adviser. There is one on here (in BC). Do a search on QROPS and you will find his posts. From memory I think he is licenced for Alberta too.

JonboyE

Yes, mjwalker007 is based in Kelowna but is also licensed to deal in Alberta.

Paul Bradley

Hi sranauta,

Unfortunately the 10 year rule JonboyE and others have referred to came into effect on 6th April 2012.

The rule is the first major change in British overseas pension legislation since Qualifying Recognised Overseas Pension Schemes (QROPS) were introduced in 2006.

I will try to explain the main change in simple terms:
Before April 6th 2012: QROPS reporting was based on residency and withdrawals were reported back to HMRC (the UK tax authority) only until someone had been non-UK resident 5 years or more

Since April 6th 2012: QROPS are bound to report all withdrawals to HMRC for 10 years since the date of the transfer.

The new reporting applies to QROPS which were transferred before April 6th 2012 so all QROPS holders need to be very careful when considering QROPS withdrawals to avoid UK taxes (unauthorised UK pension withdrawals are taxed at a hefty 55%!)

The UK tax authority is trying to prevent abuse of the QROPS system and withdrawals which would not be allowed in the UK (where funds can't be touched until age 55, at which time 25% can be taken as tax-free cash).

I hope this information helped with your question.

Kind Regards,

Paul

sranauta

Thank you Paul,

I am 61 and am actually retiring on Thursday

So if I understand correctly any withdrawals from this QROP will become taxable in UK but subject to the normal UK personal allowances? Would HMRC not be the place to get details of how this would be taxed?

Presumably if taxed in UK already then that much tax can be deducted from the Canada tax.

Or I could just invest it for 10 yrs and then start doing something with it - if I am still alive - haha.

I have a rental home in UK I better sell that and get the funds over here quick before they start charging capital gains tax on that - at the moment none is payable there - altho I will be paying that here but the gain is not huge because of the depressed market there.

Thanks for your information again

Paul Bradley

Hi Sranuta,

That isn't quite how it would work:

Income from your QROPS is taxed under the Canadian system.

Any UK tax would be a tax penalty (unauthorised payments charge and potentially an unauthorised payments surcharge).

As you are age 61 (and congratulations on your upcoming retirement), you satisfy a key requirement which states:
"No payment of pension may be made before the day on which the member reaches normal minimum pension age, unless the ill-health condition was met immediately before the member became entitled to a pension under the scheme." As previously stated the 'normal minimum pension age' is 55. There are other requirements which would need to be observed to ensure the provider stayed within the QROPS rules (the official guidance update is 21 pages long!)

Some QROPS providers do not fully understand the new rules and will adopt a cautious stance. If they fall foul of the HMRC rules they risk losing their QROPS status which has very bad implications for them and also QROPS holders (who could find themselves facing unauthorised tax penalties: 55%!)

Hence it is understandable why CIBC have taken a cautious (but unhelpful) stance and simply told you, you can't access the funds. Your withdrawal will be reported to HMRC and can therefore be scrutinized.

In cases I have been involved with recently I have needed to work with constructive QROPS providers (and UK pension companies) providing them with information and evidence so that they can understand the rules and work within them.

I hope this has helped

mjwalker007

Under the new rules from the 6th April 2012, the reporting requirements have changed ( now 10 years from the date of the transfer taking place ).........the U.K tax implications have not.

sranauta

Thank you Paul and mjwalker007 (licensed to kill? )
Just gogled to HRMC and found this

http://www.hmrc.gov.uk/budget-update...s-guidance.pdf

Haven't read it yet but decided to put it here to share.

Thanks

Paul Bradley

Whilst the UK tax implications have not changed it has become more important to understand the detail: withdrawals are reported to HMRC for 10 years from the date of transfer.

Previously QROPS providers (and clients) avoided withdrawals until they had been resident for 5 years (thus avoiding UK reporting)

Under the new rules withdrawals will be reported to HMRC - which makes the tax position more important to understand.