jenintheden

My husband has been offered a job in Vancouver and we intend to move in a couple of months’ time. I will look for a job on arrival. We don’t know how long we’ll be staying – at least a couple of years, could be longer (probably not forever).

I’m trying to work out what to do about pensions. His employer does not have a pension scheme (I obviously don’t know if mine will).

We want to make retirement savings of some sort while we’re away but I don’t know what the best thing to do would be. I think the options are:

1. Transfer some of our earnings to private pensions in the UK
2. Open up some form of private pension in Canada (I have no idea how this would work)
3. Pay into some other form of investment in Canada
4. Something else…?

Does anyone have any experience of this? What are the advantages/disadvantages of each option?

What do Canadians usually do?

Tangram

If the company does not offer one, option 2 would be the way to go.

Atlantic Xpat

His company likely offers contributions to a RRSP or Registered Retirement Savings Plan. This is akin to a Money Purchase pension scheme in the UK. Google it for details. You can contribute to one whilst you are in Canada, albeit not for the first year, and all contributions are tax free. What you might do when you move back from Canada & the tax implications of this are probably something that requires professional advice.

Aviator

If you are not living in the UK, you cannot contribute to private pension schemes in the UK.

Private pensions schemes in Canada are not common, usually doens through RRSP investments.

RRSP thresholds are based on what you earn and the previous years tax return. There are penalties for over contributing. For a two year stint in Canada it is probably y not worth setting up an RRSP, as it is not that easy to get funds out, especially if leaving Canada.

Some employers in Canada have an RRSP matching scheme, many don't, few have a pension scheme, unless you work for government.

JonboyE

Congratulations on the job offer. I hope you enjoy Vancouver. The length of stay makes a huge difference. I would be wary of setting up pension savings (necessarily a long-term arrangement) if you are only going to be in the country short-term.

Not a great idea. Even if you are allowed to do so (I suspect Aviator is right) you will have no UK earnings so will get no benefit from the tax deduction.

Private pension plans in Canada are called Registered Retirement Savings Plans. (RRSP) The amount you can contribute is a function of the earned income shown on your tax return for the previous year. Except in a few limited circumstances you will not be able to contribute to an RRSP in the year you come to Canada.

You get a $ for $ deduction of taxable income for the amount you contribute to an RRSP, savings within the plan are tax-sheltered, but any withdrawal is taxable income. They work well for many people. They get a tax refund when they are earning, benefit from years of tax-free compounding, and when they withdraw the funds they are retired and very likely paying a much lower rate of tax.

An RRSP is not really suitable for short-term savings. The tax rebate is nice when you get it but you won't have time to benefit from tax-free compounding and it is quite likely that your tax rate will be higher when you withdraw than when you contributed. I.e. you end up paying more tax.

Tax Free Savings Accounts (TFSA) are similar to ISAs. There is no tax break on contributions (Max $5,000 each per year) but funds in the plan are tax sheltered. Withdrawals are not taxable. If you decide to go back to the UK after a couple of years you can take all your money out of the TFSA with no consequences and put it into private pension plans in the UK and get your tax deduction there.

Tangram

Sorry didn't read your plans for a short term stay. Ignore my post.

Alan2005

If knew 100% that I was only here for a year or two, sod the pension, I'd just be transferring as much CAD$ out as I could while the exchange rate is where it is.

Almost Canadian

Isn't that what bankers do? Are you one of them?

Tangram

Is that cockney rhyming slang ?

Alan2005

No, bankers issue debt. And no I'm not one of them - unless you are using cockney rhyming slang.

jenintheden

Great. Thanks for all that.

I hadn’t thought about the fact that we wouldn’t get tax relief on any UK contributions if we’re not earning in the UK. Good point, well made!

I’ll add “open up tax free Canadian savings account” to the list of things to do…