MandyStock

I shall take everything you say on board. We certainly don't want to get stung for tax. We will have to arrange flights for after payment is made. According to the literature supplied to us so far, final payment can be made "up to" 30 days after final day of work, but on most occasions it is paid within 7 days. Whether this is working days it does not say. We were planning on purchasing flights early, so that we knew that was something else crossed off our list - however, it is probably more financially viable to pay more for air tickets + not get taxed, rather than cheaper air tickets + tax on lump sum. Thank you for letting me know how it worked out for you - it certainly makes me more wary about the 7 day window, which we were working on.

Almost Canadian

If it is paid into a QROPS the funds will have to remain there for 5 years from that date one first becomes a tax resident in Canada to avoid having to pay tax upon it in the UK. I am not sure where you are getting 3 years from.

Almost Canadian

I take it he wasn't a very good one if he didn't obtain a promotion in 20 years

Winston Green

Might be worth purchasing flights through a scheduled airline they can be changed much easier than a charter airline. We booked with air Canada as they allowed for a free change of days if necessary. Check them out as you might be able to book early and still have option to change days if necessary.

MandyStock

Thanks. Good advice. We will explore all avenues & see how it goes. Cheers Mandy

MandyStock

Can I just clarify one more thought that I have had. If we ensure that the lump sum is received into our UK bank account before becoming tax residents in Canada, so that it remains tax free. Would there then be no issue on transferring the money to a Canadian account? I would imagine that it wouldn't matter whether this arrives a few days or months after us?

Winston Green

That is correct. You would have to tell bank or exchange facility where you got money but that is just for UK money laundering purposes. CRA have no interest as long as it can trace it when it arrives in Canada

mardyarse

not a problem, in fact we booked our rate in advance and paid a deposit. So we knew the money was coming in July and actually exchanged in the April time.

mardyarse

3 years we were told by our Canadian FA. However if you say it is 5 years then so be it. But my point here was not the length of time it is tied up but the fact that it will be taxed on withdrawal. Quite frankly I was just trying to help out another military family on my way rushing out the door!!

shelley748

does anyone know if you chose to have the lump sum paid in to a Locked in Retirement account, would it still be taxed?

MandyStock

If the above were the case, do you think it would be ok to begin transferring savings across to our Canadian account getting ready for our move and before becoming "tax residents" or do you think having more than a couple of thousand in a Canadian account would be a problem?

JonboyE

If you are just accumulating funds in the Canadian account it should not be a problem.

MandyStock

JonBoyE, Thanks for that. We were thinking of maybe sending a bit across, as the exchange rate is a bit better than it has been for a while. Always a risk that it might improve even more - but you have to move it some stage don't you? Spreading the risk might be preferable to leaving it all to the last minute. Thanks again.

getoutofbritainquick

If anyone finds an answer let me know????? I have been pondering this one for the past 5 years. I have 1 1/2 more years until my UK company pension pays out a nice lump and hate the tought of giving 43% to the Canadian tax man. Thinking about not taking the lump sum and taking additional pension. Not sure this is a good idea in the UK ; just received a pension update from my ex UK company and the fund in 2010 was roughly 30% underfunded to meet its future liabilites and its one of the most profitable and stable businesses in the UK. God knows what the deficit is now after the latest economic turmoil Dont want to put money in RRSP's either - could end up losing the lot!!!! Cash seems a safe option nowadays.:

JAJ

You could always stand back and look at the benefits you get from being a Canadian citizen/permanent resident and living in Canada ... the flipside of this is that you get to pay Canadian taxes. The UK "tax free lump sum" is very generous, considering that the contributions made were not taxable in the first place, however it appears that Canada does not replicate this in its tax code.

Take professional tax and investment advice before making any decision, but you options appear to include:

1. Take the lump sum, pay the tax.

2. Take the lump sum, defer all or part of it into a Canadian RRSP (to the extent you're eligible to contribute). You should be able to select conservatively invested funds so you don't "lose the lot" but you will probably pay tax in future when you draw down your RRSP. But perhaps not at such a high rate.

3. Abandon your residence in Canada and return to the UK before the lump sum is paid. This would have to be a genuine severing of residential ties, not just a short term expedient.

4. Take the pension instead of the lump sum. You'll pay tax on the income but perhaps not always at such a high rate if your other income reduces. Also, if you are in good health and expect to live a reasonable lifespan, you might get more dollars in the long term that way. Of course, you are exposed to the risk of your pension fund running out of money - your employer is supposed to back this up but if they go bankrupt or something, then that layer of protection no longer exists. You're also exposed to more risk on the sterling exchange rate, long term. Another risk to consider, and you'd need professional advice to know if it's real, is that company pensions in payment may be more secure than accrued pensions not yet in payment.