Youngsters Pensions advice
Jan 15th 2019, 7:37 am
#1
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Youngsters Pensions advice
Good morning,
my apologies in advance I realise there are multiple threads on pensions however I could not find answers to my specific situation and was looking for some advice.
I’m likely moving to Canada as a permanent resident in July this year with my partner. I’m only 24 so whilst pensions aren’t exactly pressing at this stage I just wanted to be clear what I was doing before the move. My knowledge of pensions as a whole is fairly limited so any explanations in layman’s terms would be appreciated. I have a few questions:
1. Being only 24 and done an undergrad and masters degree, I have only been working full time for 18 months. Meaning, naturally my NI contributions are very limited. I have read you can continue to pay NI whilst in Canada to qualify for the state pension. Would anyone advise doing this? Would I be better paying into the Canadian equivalent of a state pension, or can you pay into both? I plan on settling in Canada for good.
2. I have a private pension through my work with Royal London, is this easily transferable? Again, is it worth the bother of trying to transfer if not? As I’ve only been working for 18 months, my contributions into this are limited so I don’t have a great deal of money in it. If I don’t transfer, I presume I would lose these funds?
3. Am I even entitled to a Canadian state pension just as a permanent resident?
4. If I have to chose between a Canadian and U.K. pension, which is better?
Thanks in advance for any advice, most threads I have seen have been from older posters who have larger pension pots however I’m in a position where I don’t have a great deal of equity on NI or my private pension so unsure how is best to proceed as it’s not the end of the world if I lose them.
Thankyou.
my apologies in advance I realise there are multiple threads on pensions however I could not find answers to my specific situation and was looking for some advice.
I’m likely moving to Canada as a permanent resident in July this year with my partner. I’m only 24 so whilst pensions aren’t exactly pressing at this stage I just wanted to be clear what I was doing before the move. My knowledge of pensions as a whole is fairly limited so any explanations in layman’s terms would be appreciated. I have a few questions:
1. Being only 24 and done an undergrad and masters degree, I have only been working full time for 18 months. Meaning, naturally my NI contributions are very limited. I have read you can continue to pay NI whilst in Canada to qualify for the state pension. Would anyone advise doing this? Would I be better paying into the Canadian equivalent of a state pension, or can you pay into both? I plan on settling in Canada for good.
2. I have a private pension through my work with Royal London, is this easily transferable? Again, is it worth the bother of trying to transfer if not? As I’ve only been working for 18 months, my contributions into this are limited so I don’t have a great deal of money in it. If I don’t transfer, I presume I would lose these funds?
3. Am I even entitled to a Canadian state pension just as a permanent resident?
4. If I have to chose between a Canadian and U.K. pension, which is better?
Thanks in advance for any advice, most threads I have seen have been from older posters who have larger pension pots however I’m in a position where I don’t have a great deal of equity on NI or my private pension so unsure how is best to proceed as it’s not the end of the world if I lose them.
Thankyou.
Jan 15th 2019, 2:14 pm
#2
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Re: Youngsters Pensions advice
to the forum. Hopefully they will help you as much as they did me.The first thing to mention is that in relation to the state pension scheme you will not have a choice about whether you contribute in Canada or not. Canadian Pension Plan (CPP) is taken as deductible out of each paycheck in a similar way to the way NI is taken out in the UK. You will be contributing. In relation to the your current UK NI payments, you can make voluntary payments, however IMHO, given your contributions are only for a few year, I do not think you would see much benefit in paying voluntary contributions if your plan is to settle in Canada long term. I moved to Canada after about 10 years contributions in the UK and in the end decided against making continued voluntary payments. The government is also proposing to make changes to the system that will also make it more expensive and I also have doubts how Brexit will impact economy and therefore pensions in UK.
In relation to your private company pension they can be transferred but it is tricky and can be expensive. You will not be able to contribute anymore once you are no longer a UK tax payer however, there is nothing against you leaving the pension in the UK and letting it mature. A small amount now may still be a substantial sum by retirement. Just let the pension managers know your new address and they will continue to keep you updated of the performance.
Jan 15th 2019, 2:22 pm
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Re: Youngsters Pensions advice
Just to disagree with the above, if I were you i would make voluntary NIC’s. Paying £150 a year to get over £8500 a year in potential return seems a pretty good deal to me. It’s only a few quid a week, if I were 24 (I wish!), I’d do it personally.
If the UK state pensions remains, it would only take about six months for you to be paid back in full everything you’ve contributed, everything after that would be profit, so worth a punt I’d say.
If the UK state pensions remains, it would only take about six months for you to be paid back in full everything you’ve contributed, everything after that would be profit, so worth a punt I’d say.
Last edited by christmasoompa; Jan 15th 2019 at 2:33 pm.
Jan 15th 2019, 3:18 pm
#4
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Re: Youngsters Pensions advice
Just to disagree with the above, if I were you i would make voluntary NIC’s. Paying £150 a year to get over £8500 a year in potential return seems a pretty good deal to me. It’s only a few quid a week, if I were 24 (I wish!), I’d do it personally.
If the UK state pensions remains, it would only take about six months for you to be paid back in full everything you’ve contributed, everything after that would be profit, so worth a punt I’d say.
If the UK state pensions remains, it would only take about six months for you to be paid back in full everything you’ve contributed, everything after that would be profit, so worth a punt I’d say.
Jan 15th 2019, 5:21 pm
#5
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Re: Youngsters Pensions advice
I fully agree with the above comments, however another option is you can wait a few years before starting to pay the NI for your British OAP. I was able to backdate 6 years NI payments amounting to around 900 pounds. This way it gives you time to truly make sure your future is in Canada.
Jan 15th 2019, 6:25 pm
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Re: Youngsters Pensions advice
Thankyou all for the replies, it’s very helpful.
I think I would prefer to keep making the NI contributions for the U.K., to give me more of a safety net should my circumstances change and I come back. I am planning on settling on Canada for good however of course this could easily change after a few years there if I don’t like it.
My next question would be then, is the Canadian state pension better or worse than the U.K.? In terms of what pays out more?
One last thing, is there any rules that would stop me claiming a U.K. and Canadian state pension at the same time?
I think I would prefer to keep making the NI contributions for the U.K., to give me more of a safety net should my circumstances change and I come back. I am planning on settling on Canada for good however of course this could easily change after a few years there if I don’t like it.
My next question would be then, is the Canadian state pension better or worse than the U.K.? In terms of what pays out more?
One last thing, is there any rules that would stop me claiming a U.K. and Canadian state pension at the same time?
Jan 15th 2019, 6:46 pm
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Re: Youngsters Pensions advice
Good morning,
my apologies in advance I realise there are multiple threads on pensions however I could not find answers to my specific situation and was looking for some advice.
I’m likely moving to Canada as a permanent resident in July this year with my partner. I’m only 24 so whilst pensions aren’t exactly pressing at this stage I just wanted to be clear what I was doing before the move. My knowledge of pensions as a whole is fairly limited so any explanations in layman’s terms would be appreciated. I have a few questions:
1. Being only 24 and done an undergrad and masters degree, I have only been working full time for 18 months. Meaning, naturally my NI contributions are very limited. I have read you can continue to pay NI whilst in Canada to qualify for the state pension. Would anyone advise doing this? Would I be better paying into the Canadian equivalent of a state pension, or can you pay into both? I plan on settling in Canada for good.
2. I have a private pension through my work with Royal London, is this easily transferable? Again, is it worth the bother of trying to transfer if not? As I’ve only been working for 18 months, my contributions into this are limited so I don’t have a great deal of money in it. If I don’t transfer, I presume I would lose these funds?
3. Am I even entitled to a Canadian state pension just as a permanent resident?
4. If I have to chose between a Canadian and U.K. pension, which is better?
Thanks in advance for any advice, most threads I have seen have been from older posters who have larger pension pots however I’m in a position where I don’t have a great deal of equity on NI or my private pension so unsure how is best to proceed as it’s not the end of the world if I lose them.
Thankyou.
my apologies in advance I realise there are multiple threads on pensions however I could not find answers to my specific situation and was looking for some advice.
I’m likely moving to Canada as a permanent resident in July this year with my partner. I’m only 24 so whilst pensions aren’t exactly pressing at this stage I just wanted to be clear what I was doing before the move. My knowledge of pensions as a whole is fairly limited so any explanations in layman’s terms would be appreciated. I have a few questions:
1. Being only 24 and done an undergrad and masters degree, I have only been working full time for 18 months. Meaning, naturally my NI contributions are very limited. I have read you can continue to pay NI whilst in Canada to qualify for the state pension. Would anyone advise doing this? Would I be better paying into the Canadian equivalent of a state pension, or can you pay into both? I plan on settling in Canada for good.
2. I have a private pension through my work with Royal London, is this easily transferable? Again, is it worth the bother of trying to transfer if not? As I’ve only been working for 18 months, my contributions into this are limited so I don’t have a great deal of money in it. If I don’t transfer, I presume I would lose these funds?
3. Am I even entitled to a Canadian state pension just as a permanent resident?
4. If I have to chose between a Canadian and U.K. pension, which is better?
Thanks in advance for any advice, most threads I have seen have been from older posters who have larger pension pots however I’m in a position where I don’t have a great deal of equity on NI or my private pension so unsure how is best to proceed as it’s not the end of the world if I lose them.
Thankyou.
1. Register for voluntary NI contributions as soon as you leave the UK. Right now Class 2 is the best deal. You will also automatically contribute to the Canadian Pension Plan (CPP) if you work as an employee. This way you will have two state pensions on retirement.
2. If your private pension falls in the QROPS category then unfortunately Canada as a country does not exist on HMRC's approved list for pension transfers at the present time. Hence you may not transfer it until the rules change.
3. Yes, you will be as long as you pay into the system throughout your career.
4. This is irrelevant since you don't have a choice. It is mandatory for employee workers to pay into CPP.
Hope this helps.
Jan 15th 2019, 6:57 pm
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Re: Youngsters Pensions advice
Great foresight for a 24 year old to have on pensions and retirement.
1. Register for voluntary NI contributions as soon as you leave the UK. Right now Class 2 is the best deal. You will also automatically contribute to the Canadian Pension Plan (CPP) if you work as an employee. This way you will have two state pensions on retirement.
2. If your private pension falls in the QROPS category then unfortunately Canada as a country does not exist on HMRC's approved list for pension transfers at the present time. Hence you may not transfer it until the rules change.
3. Yes, you will be as long as you pay into the system throughout your career.
4. This is irrelevant since you don't have a choice. It is mandatory for employee workers to pay into CPP.
Hope this helps.
1. Register for voluntary NI contributions as soon as you leave the UK. Right now Class 2 is the best deal. You will also automatically contribute to the Canadian Pension Plan (CPP) if you work as an employee. This way you will have two state pensions on retirement.
2. If your private pension falls in the QROPS category then unfortunately Canada as a country does not exist on HMRC's approved list for pension transfers at the present time. Hence you may not transfer it until the rules change.
3. Yes, you will be as long as you pay into the system throughout your career.
4. This is irrelevant since you don't have a choice. It is mandatory for employee workers to pay into CPP.
Hope this helps.
Thanks very much for this, very helpful.
It seems like like I would be silly not to continue with the NI contributions then once I move.
Im aware the U.K. pension is frozen from when I start receiving payments (I’m aware this is a very long way away) so I would hope by then, they will have changed this so it increases with inflation.
Jan 15th 2019, 7:23 pm
#9
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Re: Youngsters Pensions advice
Just to disagree with the above, if I were you i would make voluntary NIC’s. Paying £150 a year to get over £8500 a year in potential return seems a pretty good deal to me. It’s only a few quid a week, if I were 24 (I wish!), I’d do it personally.
If the UK state pensions remains, it would only take about six months for you to be paid back in full everything you’ve contributed, everything after that would be profit, so worth a punt I’d say.
If the UK state pensions remains, it would only take about six months for you to be paid back in full everything you’ve contributed, everything after that would be profit, so worth a punt I’d say.
so to confirm, voluntary contributions only need to amount to £150 per year whilst you live abroad and that still counts as a full years contribution?
The reason I ask is to backdate the years I’ve not been working whilst studying, it’s saying it will be around £600 per year to backdate them.
EDIT:
so according to The government website, I can only pay class 2 contributions from abroad if I’ve paid in 3 years of national insurance contributions. At the moment, I’ve only paid one full year and will have my second pressumably in April. So I would need to backdate one of my years (looking like about £600) to be legible to start paying class 2 contributions from Canada? And the class 2 contributions are £150 a year?
Last edited by Scotcad; Jan 15th 2019 at 7:46 pm.
Jan 15th 2019, 7:46 pm
#10
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Re: Youngsters Pensions advice
so to confirm, voluntary contributions only need to amount to £150 per year whilst you live abroad and that still counts as a full years contribution?
The reason I ask is to backdate the years I’ve not been working whilst studying, it’s saying it will be around £600 per year to backdate them.
You need to look for the Class 2 contributions, not Class 1, which are much more expensive and whether you qualify to pay them.
Jan 16th 2019, 12:57 pm
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Re: Youngsters Pensions advice
Thankyou all for the replies, it’s very helpful.
I think I would prefer to keep making the NI contributions for the U.K., to give me more of a safety net should my circumstances change and I come back. I am planning on settling on Canada for good however of course this could easily change after a few years there if I don’t like it.
My next question would be then, is the Canadian state pension better or worse than the U.K.? In terms of what pays out more?
One last thing, is there any rules that would stop me claiming a U.K. and Canadian state pension at the same time?
I think I would prefer to keep making the NI contributions for the U.K., to give me more of a safety net should my circumstances change and I come back. I am planning on settling on Canada for good however of course this could easily change after a few years there if I don’t like it.
My next question would be then, is the Canadian state pension better or worse than the U.K.? In terms of what pays out more?
One last thing, is there any rules that would stop me claiming a U.K. and Canadian state pension at the same time?
A single person old age pension in Canada now is $540.77 per month, Both you and your partner receive that.
There is a joint old age pension payment of $898.32 per month where only one person from a couple qualifies for the pension
There is however a 2nd pension in Canada called the Canada Pension Plan (CPP). This pension is dependent on your contributions from earnings over your working life.
If you earn over $55,900 you will pay the maximum into your CPP for the year 2018 of $2,593.80.
To get the maximum return from your CPP at retirement you need 40 contributing years in and that currently pays $1,154.58 per month at age 65. Both people in a relationship also qualify for there own CPP, and this is on top of OAP. For me I have just started to claim my CPP however I only have 29 contributing years plus I am taking it 2 years before I turn 65 so my figure is around 60% of the above figure.
No issues claiming both UK and Canadian old age pensions, currently Canadian OAP starts at age 65 where the UK will be at age 66 when I get there, but these ages will change dramatically no doubt in your lifetime.
One other "sleeping pill" with Canadian OAP is if you are bringing more than $75,910 in retirement they start a claw back of your pension and once you earn $122,843 in retirement they have clawed all your OAP pension back. Various ways of income splitting and sharing between couples can help with this issue.
Anyway hope this enlightens you.
Last edited by Kentonmag; Jan 16th 2019 at 1:00 pm.
Jan 16th 2019, 8:40 pm
#12
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Re: Youngsters Pensions advice
Regarding the Canadian old age pension against the UK OAP
A single person old age pension in Canada now is $540.77 per month, Both you and your partner receive that.
There is a joint old age pension payment of $898.32 per month where only one person from a couple qualifies for the pension
There is however a 2nd pension in Canada called the Canada Pension Plan (CPP). This pension is dependent on your contributions from earnings over your working life.
If you earn over $55,900 you will pay the maximum into your CPP for the year 2018 of $2,593.80.
To get the maximum return from your CPP at retirement you need 40 contributing years in and that currently pays $1,154.58 per month at age 65. Both people in a relationship also qualify for there own CPP, and this is on top of OAP. For me I have just started to claim my CPP however I only have 29 contributing years plus I am taking it 2 years before I turn 65 so my figure is around 60% of the above figure.
No issues claiming both UK and Canadian old age pensions, currently Canadian OAP starts at age 65 where the UK will be at age 66 when I get there, but these ages will change dramatically no doubt in your lifetime.
One other "sleeping pill" with Canadian OAP is if you are bringing more than $75,910 in retirement they start a claw back of your pension and once you earn $122,843 in retirement they have clawed all your OAP pension back. Various ways of income splitting and sharing between couples can help with this issue.
Anyway hope this enlightens you.
A single person old age pension in Canada now is $540.77 per month, Both you and your partner receive that.
There is a joint old age pension payment of $898.32 per month where only one person from a couple qualifies for the pension
There is however a 2nd pension in Canada called the Canada Pension Plan (CPP). This pension is dependent on your contributions from earnings over your working life.
If you earn over $55,900 you will pay the maximum into your CPP for the year 2018 of $2,593.80.
To get the maximum return from your CPP at retirement you need 40 contributing years in and that currently pays $1,154.58 per month at age 65. Both people in a relationship also qualify for there own CPP, and this is on top of OAP. For me I have just started to claim my CPP however I only have 29 contributing years plus I am taking it 2 years before I turn 65 so my figure is around 60% of the above figure.
No issues claiming both UK and Canadian old age pensions, currently Canadian OAP starts at age 65 where the UK will be at age 66 when I get there, but these ages will change dramatically no doubt in your lifetime.
One other "sleeping pill" with Canadian OAP is if you are bringing more than $75,910 in retirement they start a claw back of your pension and once you earn $122,843 in retirement they have clawed all your OAP pension back. Various ways of income splitting and sharing between couples can help with this issue.
Anyway hope this enlightens you.
A married or common-law couple should split their pension income ..................
personal experience ....................
OH retired and started drawing his OAS (not OAP!!), CPP, and private pension plan payout before income splitting came into effect.
He never received any OAS payments, but it was included on his T4a Statement of Pension, Retirement, Annuity, and Other Income from the government for income and tax purposes.
We split his OAS and CPP pensions when the new rule came into effect ........ he got the whole amount of his half of them with no further clawback, and my OAS and CPP payments increased.
I gather the split can be up to one-half of OAS.
ScotCad ......... one thing you should consider is making regular contributions to an RRSP (Registered Retirement Savings Plan), starting as soon as you possibly can after starting work. Even $20 a week or month will mount up very quickly.
The Canadian OAS and CPP pensions are NOT intended to be your sole income when retired, the intent was to provide a basic level for people who otherwise had nothing. If you do not have a company private pension plan, then the RRSP is one alternative.
The money really is impossible for any kind of normal life for most people who have to pay rent, mortgage, city taxes, etc. My OAS and CPP account for around $12,000 a year, and that is about standard for someone who worked and paid into the two for over 30 years.
Jan 16th 2019, 8:50 pm
#13
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Re: Youngsters Pensions advice
OP - Honestly, at your age I would forget about either country's state pension (if you stay in Canada, you will get that anyway) - what they are giving now as a pension is highly unlikely to be what they are paying you in 40 - 45 years - they will find a way to erode what they pay to the point where you should consider it 'fun money' and not something that would form a major plank of your retirement strategy. Don't trust governments with your money as what both Canada and the UK pay out is 'unfunded', which is to say that the money they pay out to pensioners today is money they are getting in today from the working population - they will find ways of eroding future value (UK firmly committed to increasing pension age - already 66, now heading to 70+ over the next couple of decades).
Instead, invest in your own 'personal pension' which in Canada would be an RRSP and pay close attention to any pension schemes offered by a Canadian employer and take full advantage of these.
Instead, invest in your own 'personal pension' which in Canada would be an RRSP and pay close attention to any pension schemes offered by a Canadian employer and take full advantage of these.
Jan 16th 2019, 9:23 pm
#14
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Re: Youngsters Pensions advice
OP - Honestly, at your age I would forget about either country's state pension (if you stay in Canada, you will get that anyway) - what they are giving now as a pension is highly unlikely to be what they are paying you in 40 - 45 years - they will find a way to erode what they pay to the point where you should consider it 'fun money' and not something that would form a major plank of your retirement strategy. Don't trust governments with your money as what both Canada and the UK pay out is 'unfunded', which is to say that the money they pay out to pensioners today is money they are getting in today from the working population - they will find ways of eroding future value (UK firmly committed to increasing pension age - already 66, now heading to 70+ over the next couple of decades).
Instead, invest in your own 'personal pension' which in Canada would be an RRSP and pay close attention to any pension schemes offered by a Canadian employer and take full advantage of these.
Instead, invest in your own 'personal pension' which in Canada would be an RRSP and pay close attention to any pension schemes offered by a Canadian employer and take full advantage of these.
and excellent advice!
Jan 17th 2019, 5:44 pm
#15
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Re: Youngsters Pensions advice
OP - Honestly, at your age I would forget about either country's state pension (if you stay in Canada, you will get that anyway) - what they are giving now as a pension is highly unlikely to be what they are paying you in 40 - 45 years - they will find a way to erode what they pay to the point where you should consider it 'fun money' and not something that would form a major plank of your retirement strategy. Don't trust governments with your money as what both Canada and the UK pay out is 'unfunded', which is to say that the money they pay out to pensioners today is money they are getting in today from the working population - they will find ways of eroding future value (UK firmly committed to increasing pension age - already 66, now heading to 70+ over the next couple of decades).
Instead, invest in your own 'personal pension' which in Canada would be an RRSP and pay close attention to any pension schemes offered by a Canadian employer and take full advantage of these.
Instead, invest in your own 'personal pension' which in Canada would be an RRSP and pay close attention to any pension schemes offered by a Canadian employer and take full advantage of these.
thanks very much for this info, I didn’t realise there was technically two state pensions in Canada. And of course, I plan to invest in my own private pension whatever form that takes, however I just wanted to have my bases covered before I left than leaving anything to chance.
And obviously I’m a long way off thinking about retiring, but my occupation is well paid, as is my partners so we’re looking to invest this Wisely and fingers crossed he able to retire relatively ‘young’.
