nofrills

Hello all
I'm thinking of immigrationg to Canada from the UK, and have two questions for those in the know:

1. I've realised, I would need to pretty quickly transfer my savings from UK banks to Canada.
what's the latest this needs to be done, at whqt stqge of my emigration.
I, most likely would first be working on a 6 months TWP and then apply for PR
i think GBP is undervalued these days and would prefer to wait for it to get closer to being 1:2 cad, is there anyway I could open a GBP account in one of Canadian banks, when time comes for me having to transfer my funds to Canada as part of my immigration process, and convert GBP to CAD when I decide it is the right time?

2. Is there any way I could still legaly contribute to my UK old age pension, in order to not lose inflation indexation over the years before I retire?
How to go about it?

Thank you for

BristolUK

You can continue to pay in to get a higher rate but you wouldn't get the index linked uprating in Canada once in payment. It's frozen.

nofrills

so, that means my current government old age pension won't be increases in line with inflation when I reach pension age then?
hmm, not looking good then.
trying to think outside the box.
what would have happened, if I decide to move to Canada, not contribute anything to my old age pension anymore, lived in Canada for some years and then decided to retire to a country that has a reciprocal agreement signed with th UK, say one of the EU countries for example.
would my UK pension be indexed for inflation?

thanks

Aviator

You may want to figure out if you are eligible for immigration first.

Whenever you like

Not that straightforward. There is no 6 month TWP and an employer is unlikely to go through the cost to hire you for 6 months. You perhaps should look further into immigration, your job and likelihood of an employer getting a LMIA approved or you getting PR. If you are under 30, this is a lot easier as far as a WP is concerned.

You may be in for a long wait! It has not been that for a great many years and no signs it is heading that way. Also, if you are in Canada and a tax resident, any gain in the value of currency is taxable as a capital gain.

HSBC offer a GBP savings account, makes it harder to use anyone for the FX than HSBC though and you are tied to whatever rate they give you. Keeping it in a UK account is easier in my view.

You should perhaps investigate tax implications and the T1135 if you are a Canadian resident for tax purposes (not the same as for immigration purposes) if you have savings overseas, or when you exchange currency.

BristolUK

Whatever % of years you have paid in right now, you'd get the % of whatever the rate is when you reach pension age (assuming no more changes between now and then) and that's the rate that gets frozen. So you would get the current value uprated to the future value, just not the annual increases thereafter. Continuing to pay in would increase the % of the rate you'd get making the frozen rate higher, so there is still some benefit from paying in.
It's worth applying for a pension forecast.
Yes. But if you continued to pay in while in Canada, your annual uprating would be on a higher starting rate. With Brexit, the EU might be a non starter of course, but the USA would work.

Note that you may also qualify for a Canadian pension at 65. There's Canada Pension Plan (contributions based) and depending on other income (there's a cut off around $70k I think) there's Old Age Security (based on years resident in Canada). You need 10 years but if you have less than 10, you may be treated as qualifying from periods in another country.

nofrills

@ Aviator

1. I have figured that out already, I am eligible for immigration
2. Whenever I like?
From what I've read so far on this forum, people say, if you are in a process of immigration to Canada, at some stage, you need to transfer your savings from the UK, as if you do it at a later time, you need to pay some taxes.
3. "Also, if you are in Canada and a tax resident, any gain in the value of currency is taxable as a capital gain."
Am I not allowed to transfer my saving to Canada tax free?
4. Some years ago I opened AUD account in a British bank in the UK, I transferred my savings from Australia, where I lived for a few years, and then converted these funds into GBP using one of the FX specialists, and the only fee I paid to the bank was account opening and closing fees, which were a few pounds worth of fees.

I thought the same thing could be done when in Canada.

nofrills

@ BristolUK

Let me make sure I've understood you correctly

What you are saying is that , lets say, if so far I have contributed enough to have £100 of old pension paid to me on weekly basis when I reach retirement age, then if I decided to move to Canada and reached my retirement age in, lets say, 20 years time, my UK weekly old age pension will get increased by inflation during these 20 years, lets say 50%, so if I was to retire in 20 years time, inflation over that time was 50%, I would then be getting not £100, but £150 on weekly basis from the UK, am I right?

"So you would get the current value uprated to the future value, just not the annual increases thereafter"

What do you mean by annual increases thereafter?

I wasn't counting on any increases in my pension, I was only hoping that my old age pension would keep up with inflation over the years, from the time I emigrated and stopped contributing to the time, I reached my retirement age and started drawing my old age pension.

What's pension forecast and where to get it from?

Thanks

Aviator

You can hold funds in whatever currency you choose, whenever you choose. There is no immigration rule on when you have to transfer funds.

If you get the best FX rate prior to becoming tax resident (such as still a UK resident), there is no taxable gain. However, once you become tax resident of Canada, the FX rate is set at that day, any gain in the value from investment, or through an improvement in the FX is reportable. Interest is taxed at your marginal rate, FX gain is a capital gain and taxed at your marginal rate, but only 50% of the gain is taxable. e.g. You become tax resident in Canada on September 1, you hold £500,000 in a GBP account (here or in the UK), the FX rate on the day you become tax resident is $1.75, so your funds are deemed to be worth $875,000 CAD on that day (this may be theoretical value if still held in GBP), that is not taxable, in Canada. You decide to hold out for a better rate, and a few months later, manage to get $2.00, so now you get $1,000,000 for your £500,000. The $125,000 is the capital gain and must be reported to CRA, $62500 of that is taxable. Conversely capital losses are allowable against future gains. It is the same in the UK, any currency gains are taxable and should be reported (by the tax payer).
Fees to banks and FX brokers are an entirely separate issue.
Also, be aware of the T1135 Foreign Income Verification form and your obligations to report.

Always best to consult an accountant about specific circumstances before deciding what to do.

BristolUK

Yes, that's the gist of it.
Current full pension is £164.35 pw so if you had paid in enough to get £100 right now, that's about 61% or about 21 years of the 35 needed.
If the full pension was £200 when you qualified, you'd get about £120 (21/35ths) and if the full amount was £250, you'd get about £150.

So by whatever means the government would use for uprating of the full amount, you'd continue to qualify for 21/35ths of that.

In the same way that indexing would apply to the current full rate and your partial rate between now and when you qualify, indexing continues to apply when in receipt. Those would be the increases thereafter; in Canada.

It would.
https://www.gov.uk/check-state-pension

nofrills

Thanks gents for answering my questions

@Aviator

So, basically, I would become a Canadian tax resident, on the day when I start working day and paying taxes, am I right?

@BristolUK

I still don't quite understand how pension indexing works.
I thought indexing meant increases with inflation, as I mention in my post above.

I checked in google what it means, and that's what I got:

"Index-linked wages, pensions, or insurance policies increase or decrease according to the rise or fall of prices. ... An index-linked pension delivers annual increases linked to inflation."

so, only if I kept contributing , my pension contributions would be indexed for inflation, if I stopped and moved to Canada, when I reached my retirement age, I would be getting the nominal value of my pension from the time I stopped contributing, so if my old age pension was worth £100/week at the time when I stopped contributing, when I reached my retirement age I would still be getting £100 a week, despite inflation being, say 50% , so I wouldn't be getting £150/week, but still £100/week.

What am I missing here?

BristolUK

No.
The first point is that pension increases are sometimes linked to inflation and other times earnings. Whatever suits the government of the day.

It makes no difference whether you stop making contributions or continue. If your conts are currently worth a pension of £100 when the full pension is £164, you would be due 100/164ths (or 61%) of the full rate. If that £164 has become £250 from indexing (of whatever type) when you would qualify, you would get 61% of the £250.

So if you had currently built up £100 worth, that would increase by indexing when you come to draw it.

Aviator

This explains it https://www.canada.ca/en/revenue-age...cy-status.html

Novocastrian

Err, not that many years. I was unfortunate enough to transfer the proceeds of my house sale to the UK in July 2015 when the bank rate was $C2.05 to the £. I used a n FX company and got 1.93 but that was't exactly a coup.

nofrills

Thank you gents for expaining those issues.

@BristolUK
so, since I would be getting my pension increased by inflation at least when I reached my retirement age, then there is no advantage keeping contributing to the UK old age pension, unless I wanted to have a higher old age pension paid to me by the UK government.
I don't understand why there are so many posts on this forum complaining why Canada hasn't got some type of agreement signed with the uk making their pension indexed when they reach retirement age.
, when as you said it doesn't really matter as everyone who emigrated to Canada from the UK will have his/ her pension indexed for inflation no matter what.
those that decide to cintribute to their uk old age pension when they decide to emigrate tl Canada live there untill their retirement age, will be able to receive old age pension from both countries, Canada ( emount depended on how many years they contributed to the Canadian pension) and the UK old age pension also dependent on the number of years their they contributed to the UK system.

am I right?

glendem4

Once you start claiming your UK state pension, it will be frozen. Say you retire at 66 in 2020. The UK state pension £164.35 will probably rise to around £172 with indexing. If you live in Canada you will only receive £172 for the rest of your life, where as someone in the UK will get on average a £5 rise every year, assuming the inflation level is around 2.5%. Ten years down the line the UK pension will be around £220, but you will still be only getting £172. Hope that explanation helps.