Transferring UK Pensions to Canada
This article is intended as a high level guide to the question ‘Can I transfer my UK pension to a Canadian equivalent?’. The answer to the question is ‘possibly, but it depends’ and ‘just because you can does not mean to say you should’. So before directly addressing the question, it is important to understand a bit about both UK and Canadian pensions.
 Health / Wealth warning!
This article is in no way intended to provide ‘advice’, nor should it be taken as factually correct, complete or up to date in all respects. As with any such financial arrangements, it is vital that you seek proper advice from an accredited financial adviser.
 'STOP PRESS'
Following the huge 'cull' by HMRC of previously recognised Canadian schemes from the ROPS list in November, only three RRSP schemes (all with BMO) and NO RRIF schemes were left. Then on 15th February 2017, even these remaining BMO schemes have been removed from the ROPS list.
This means that as mid-February 2017, there are NO QROPS schemes listed for Canada. Therefore, there is no way currently of transferring from UK pensions to Canadian pension schemes.
There are reports that some providers are in discussion with HMRC about re-listing. The HMRC ROPS list is updated by the HMRC mid-month every month, so worth checking regularly.
In the latest UK budget, the Chancellor announced that there would be a 25% tax charge on all QROPS transfers with a few exceptions. One of those exceptions seems to be 'if the individual and the QROPS are in the same country after the transfer' - so this charge may not apply if you live in Canada and transfer to a Canadian QROPs (if or when there is one to transfer to!).
BUT, the budget then goes on to say that 'Payments out of funds transferred to a Qrops on or after 6 April 2017 will be subject to UK tax rules for five tax years after the date of transfer, regardless of where the individual is resident' - so make of that what you will.
To be updated as it becomes clearer (or not!) over the next few weeks!
 Financial advice
Be very wary of any direct approach made by so-called 'QROPs' experts. There are a number of firms that claim to specialise in 'QROPs' transfer of UK pensions to other countries, often with promises of you being able to take most or all of the money immediately even though you may not yet be age 55 or older. Avoid such firms.
In terms of transferring a pension from the UK to Canada, there are some firms knowledgeable of both regimes, or you may have to engage both a UK and a Canadian financial adviser. To find an accredited UK IFA’s, check the UK Financial Conduct Authority (FCA) and their searchable list, there is a link in External Links at the end of this article.
There are a number of Canadian and other financial advisers that specialise in such transfers. While there is no list of such specialists, a quick internet search or a search of old postings on this forum will quickly provide contact details of such advisers that others have used. Note that in Canada, a financial adviser has to be accredited separately for each province.
In order to make a transfer from the UK to Canada, you will normally have to take some form of proper financial advice, which you would have to pay for in one way or another, either by way of an agreed fee or from commission taken from the product. It is important that you ask and understand the level of charges and fees in advance before agreeing to any such transfer.
 So what can and can't be transferred?
Note that if you are paying into a UK pension savings scheme, you must stop paying contributions when you move to Canada within 5 years (non-UK income earners may be able to pay GBP £3,600 a year for five years). You cannot continue to pay after that, even if you continue to maintain a UK bank account.
 UK Pension summary
A quick summary of the various different types of UK pension will help to understand why some types of pension may be suitable to be transferred while others may not. Firstly, ‘pensions’ is a very broad term and it needs to be broken down further.
 Pension accumulation / savings
This refers to pension arrangements or products that you pay into in one way or another as a means of saving to provide for income in later life. Broadly, UK pensions savings-type arrangements can be divided into two broad categories:
In addition to the above two major categories, there is a third, sometime called ‘hybrid arrangements’, but these are normally just a mixture of the above two. In addition, note that it is possible for a person to have multiple different pension savings arrangements of different types, accumulated over a working life by virtue of moving from one job to another.
 Defined Benefit (DB)
Now uncommon although many public sector workers in the UK may still have such arrangements that they may have joined when such schemes were open. So called, because it is the ‘benefit’ that is ultimately paid out on retirement that is ‘defined’. Terms and expressions such as:
These expressions are common when talking about DB arrangements.
A good DB scheme may say something like ‘you earn 1/60th of your final salary for each year of employment subject to a maximum of 40/60th’, it would then go on to define what was meant by ‘final salary’ (e.g. average of the last five years pensionable salary). The example means that if you worked for this company on the same pension basis for your career, on retirement you would be paid 40/60th (i.e. 2/3rds) of you final salary for the rest of your life. There are often additional benefits, like defined increases each year in retirement, a percentage that would continue to be paid to your spouse on your death etc.
You will often make contributions along with your employer to pay in to such a scheme which should be shown on your payslips.
DB schemes were the norm for employers until the 1970’ / 80’s. Since then, more and more employers have closed their DB schemes to new employees and offered DC type schemes instead. The last such employers to close their DB schemes have been UK government and other public service type employers (e.g. UK civil service, NHS, Teachers, Local authorities etc.).
DB schemes open to new employees are now rare. There are however still many employees who joined their employers before the schemes closed and still have an entitlement to a DB pension on retirement, although many have seen their contributions increased to cover the liability.
DB schemes are now unpopular with employers as they bear the liability for the ultimate pension income of the employers / members. You will often hear in the press of ‘funding deficits’ and pension schemes being £x million ‘under-funded’ etc, (the BHS pension scheme and the Tata Port Talbot Steel scheme notable recent examples). Conversely, DB pensions are often seen as being very valuable to employees due to their guaranteed income in retirement promise, so you will often (if not always) hear financial advisers tell you that you should not transfer out of a DB scheme. It is NOT possible to transfer from one employers DB scheme to another employers DB scheme – the best that could be done is to take the cash value of the old DB scheme and use it to ‘buy’ additional years in a new DB scheme, but the cash values both offered by the donor scheme and asked for by the new scheme rarely make financial sense.
It is not common for it to make financial sense to take the cash-in value of a DB pension arrangement from the UK to Canada. In order to do so, you would have to ask the scheme for the cash value of your DB scheme, then transfer that to a Canadian RRSP or similar etc.
 Defined Contribution (DC)
Now the most common form of pension for employers to offer to new employees, including public sector workers. So called, because it is the amount that is paid in by the employee and employer that is defined, but what you will get at the end, on retirement is not in any way defined – you will get what the value of the pension pot is when you choose to retire. Terms and expressions such as:
These terms / products are common when talking about DC arrangements.
There are many different UK DC-type product types available either directly to individuals or via employers with a few examples noted above. They are all fundamentally DC-type pensions with the differences often being the legislation they were written under and the ‘vintage’ of the products themselves.
DC schemes are now popular with employers as they simply pay in a monetary amount and bear no liability for the ultimate value of your personal retirement fund. The UK has recently legislated to make it mandatory for employers to offer such schemes and pay in a minimum percentage of your earnings unless you specifically opt-out (refer to Workplace pensions link in External Links at end of this article).
Basically, you and / or your employer pay in money which is invested in funds (often unit-linked) that are either the ‘default’ and so relatively ‘safe’ funds or the funds that you selected (i.e. following financial advice). Depending on the funds invested in, the value of your pension ‘pot’ may go up or down and is often not ‘guaranteed’ (there are a few exceptions).
What you pay in may either be a stated monetary amount or it may be a monetary amount that is calculated by reference to a stated percentage of your pensionable salary (i.e. 2% etc.).
Without going into detail, personal contributions to such pensions are generally net of tax. That means that what you actually pay is then increased by the basic rate of tax and this is what is credited to your pension fund. For example, if you wanted £93.75 to be credited to your pension:
It is sometimes said that you get ‘tax relief’ on your contributions. It would be more accurate to say this is ‘tax deferral’. Yes you do get tax relief on what is being paid in, but when you start to take the money out at retirement you will then pay tax on what you take out.
There are annual limits on what you can contribute, an overall lifetime allowance on the total value of all pensions that you can accrue and special arrangements for tax relief for people earning more than £100,000 pa. These complications are not considered here.
You will normally receive at least an annual statement from each such pension provider. This will often include projections to your stated retirement date and other such analysis. These are simply what ‘might’ happen based on assumed growth rates and are in no way guaranteed.
It is possible and much more common to transfer a DC pension arrangement (as opposed to DB) from the UK to Canada.
 Pensions decumulation / Retirement income
This refers to a pension arrangements or product that is designed to pay an income. Term, expressions and products such as:
As such, you might consider these as ‘pensions in payment’. These will generally not concern you if you either have not yet retired or have not yet reached age 55 (there are exceptions, such as specific occupations can have earlier retirement ages like the Military etc.).
Pensions in payment have historically had been very simple. Your pension pot would ‘buy’ an annuity at retirement and this annuity would provide a guaranteed income for the rest of your life. You could select whether you wanted automatic increases, what percentage of the income to leave your spouse along with a host of additional options. Such annuities are NOT transferrable to Canada, but they can pay your income direct to a Canadian bank account at the exchange rate current at the time of each payment.
The situation became more complicated but much more flexible with the advent of the UK ‘Pension Freedom’ changes described below.
Note that it IS possible to transfer UK Income Drawdown products from the UK to the Canadian equivalent (which is a Registered Retirement Income Fund RIF / RRIF).
This refers to an arrangement / product that is designed to pay an income. Term, expressions and products such as:
Are all different types of annuity, some with different tax treatments. This was the traditional method of generating an income for life on retirement.
Annuities are like a life assurance policy in reverse.
With a life assurance policy, you pay small monthly premiums for life with a promise of a large lump sum on your death whenever that might be.
With an annuity, you pay a lump sum at outset to the annuity provider who then guarantees you an income for the rest of your life, no matter how long that is – so in both examples, the provider is assuming the ‘mortality risk’.
To do this, the annuity provider collects all of the options you may want for your annuity (do you want it to increase every year or not, if so by what rate / index, do you want an ongoing income to your widow in the event of your earlier death and if so, what % etc.). They then use your current age, where you live and your state of health to calculate what they can pay you monthly for your stated lump sum.
In order to provide a GUARANTEED INCOME FOR LIFE the annuity provider buys government bonds (aka Gilts), these give the provider a low rate of return but crucially a guaranteed rate of return. The monthly income payments are then subject to normal UK tax, deducted through PAYE by your annuity provider (while you live in the UK).
Annuities CANNOT be ‘transferred’ to Canada as such. However, you can arrange for the monthly income payments to be paid directly to a Canadian bank account. It will be converted to Canadian dollars at whatever the exchange rate is used at the date of the payment, so you will run an ‘exchange rate risk’ as GBP to CAD rates fluctuate over time. Annuity payments made to Canadian bank accounts will be subject to Canadian tax.
For a useful guide to annuities and a comparison of the sort of rates you might get refer to External Links at the end of this article.
 Income drawdown
This is a much newer method of providing for retirement income as a permitted alternative to annuities. Income Drawdowns were originally launched in 1995, but changed significantly as a result of the April 2014 changes.
Basically an Income Drawdown product is normally a unit-linked investment product where you can invest your pension pot as a single contribution from age 55 onwards into funds of your choice. You can then take an income (or not) which is funded by cancelling units. You can take any level of income at any time (i.e. anywhere between none and taking the complete value as a single lump sum) at any level that you choose. Income payments are taxed at source when paid in the UK at your normal marginal rate for the year.
Prior to April 2014, there were two types of income drawdown, either;
Capped drawdown had annual maximum limits of the total amount of money that could be taken as income in any year. These limits were set by the UK Government Actuarial Department (aka GAD limits). These were linked to gilt yields and so were typically around 3 – 4.5% of the value of the pot per annum. These limits were intended to act as some sort of safeguard to stop money being withdrawn too quickly and so risk exhausting the pension fund. A customer could take any amount of income between none and the GAD maximum in any particular year. All of the proceeds of course being subject to UK income tax.
A flexible drawdown product allowed the customer to withdraw any amount at any time (i.e. with no GAD maximum limits). However, a customer was only allowed to take a flexible drawdown if they could prove an annual retirement income of a set amount from lifetime guaranteed sources.
Income drawdown CAN be ‘transferred’ to Canada into a Canadian RRIF / RIF as long as it is a scheme that is registered on the UK HMRC ROPS list (refer to External Links). If and when you decide to transfer is up to you. As it is a true transfer from a UK drawdown arrangement to a Canadian equivalent, there is no tax charge from either the UK or Canada at the point you make the transfer, so leaving it invested in the UK for several months or years will NOT result in any tax change on any ‘gain’ in the value of the policy as a result of either fund performance of exchange rate fluctuations.
 UK ‘Pensions Freedom’ changes in April 2014
The UK pension regime underwent a significant change in April 2014.
Prior to this date, you could access your pension as early as age 55, BUT regulations made sure that while you could take the 25% tax free lump sum (if you chose to), the remaining 75% had to be used to provide some form of income for the remainder of your life. This could be either a Capped Drawdown product or an annuity product. The guiding principle of the UK government thinking and legislation was that pension savings were to provide an income for life. The government wanted to avoid the risk that you might run out of money and then rely on the state.
From April 2014 onwards, the restrictions on how much you could take out of your pension pot from age 55 were removed, meaning that you could (if you wanted) take the full value of all of your pensions savings immediately as a lump sum. As before, 25% would be tax free and the remainder would be taxed at your marginal rate for the tax year. Therefore, from this date, the government ethos is now that it is your money and how you spent it is up to you. Of course the quicker you draw the money, the quicker the government get tax from the proceeds
 Age 55
This is the earliest age you can normally take pension benefits in the UK (exceptions can apply to instances of serious ill-health etc.).
In the UK, you can take your pension pot (technical term used for this is ‘crystallise’) from age 55. You should be aware that:
You can of course take your pension proceeds at any time after age 55, leaving it as late as age 75, when you must take the proceeds.
 Pension Commencement Lump Sum (PCLS)
Also (historically) known as Tax Free Lump Sum (TFLS). This is the 25% of fund value of a DC pension that you can take free of any tax when you vest the proceeds of your pension. The balance must then either be transferred to an income drawdown or an annuity product.
You do not HAVE to take the 25% PCLS when vesting, but it would normally be ill-advised not to do so, as the money that you do transfer to an income drawdown or an annuity will ALL then be subject to income tax on withdrawal.
 Uncrystallised Funds Pension Lump Sum (UFLPS)
This is a new method introduced in April 2014 whereby all or part of the value of a DC pension can be taken from age 55 onwards as a lump sum withdrawal. Note that as these are ‘uncrystallised’ funds, the full value of every withdrawal is subject to income tax at your marginal rate (i.e. you do NOT get any PCLS).
 Income drawdown
These changed significantly. From April 2014 onwards, all new income drawdowns were effectively flexible drawdowns as the government removed the requirement for annual GAD limits and so now allow a customer to withdraw any amount out at any time (including taking the total value). Capped drawdown were withdrawn (although capped drawdowns products in place before April 2014 could continue). The ’catch’ is that the withdrawal amounts will be subject to UK tax at your marginal rate for the tax year in question.
These remain as before.
 UK State Pension
Not planning to describe this in any detail here (possibly in a later section of the Wiki).
Suffice to say that you cannot ‘transfer’ a UK state pension to a Canadian state pension per se. You can often however still claim your UK state pension at the normal UK state pension age. It can be paid automatically into a Canadian bank account in Canadian dollars (using the GBP / CAD exchange rate at the time of each payment, so subject to exchange rate fluctuations) . Note that the amount paid is ‘frozen’ as you are resident in Canada and do NOT benefit from the annual state pension increases normal under the UK ‘triple lock’ arrangement.
If you have worked in the UK and have emigrated to Canada, this may affect whether you are entitled to a British State Pension. If you are already receiving a UK State Pension, and you are living in Canada, then you will already have found out that your UK State Pension never increases - it is, in effect "frozen". If you are not yet in receipt of a UK State Pension, but will be shortly, then you will come under the auspices of the 2014 Pensions Bill. There is a lobby groups in Canada that you can talk to if you are concerned about your UK State Pension.
 Canadian Pension Summary
Very similar in principle to the UK system, but different in key and very important points of detail. Do not fall into the trap of assuming that the Canadian 'equivalent' products are the same as their British opposite numbers in all respects!
This is the Canadian equivalent (albeit with important differences in point of detail) of the UK Personal Pension product.
This is the Canadian equivalent (albeit with important differences in point of detail) of the UK Income Drawdown product.
 Canadian Pension Plan
This is the Canadian equivalent (albeit with important differences in point of detail) of the UK State Pension.
Even though a UK immigrant may never have paid into the Canadian state pension, they will still quality for a low level of pension after ten years of residence?
 Transfer Considerations
 ROPS List
AKA QROPS (old acronym no longer correct). This is a list of Recognised Overseas Pension Schemes (ROPS) that is published and maintained by UK HMRC (refer to link in External Links at the end of this article). Note, this is not an ‘Approved’ list. HMRC no longer approve pensions, though this misleading term is still in regular use.
The abiding principle of pension savings in the UK is that provision for retirement income is encouraged by the UK government through various tax incentives. As such, the government does not want to see these tax incentives used / abused for any purpose other than providing for an income in retirement.
Historically (and indeed currently) one such avenue of abuse was to transfer the value of a UK pensions accumulation product to an ‘equivalent’ product in an overseas country, but where the rules for taking money from the policy in that overseas country may not be as strict as those in the UK, so it could mean the investor takes the money before they would be entitled had they remained in the UK and / or at a lower rate of tax than in the UK (aka Pensions Liberation scams – refer External Links).
So HMRC attempted to counter such illegal transfers overseas by maintaining a list of overseas pension schemes and products that HMRC ‘recognise’ as being the equivalent of a UK product and crucially one where the overseas provider agrees to HRMC restrictions as regards to access of funds and reporting of any money taken from the product for a period of ten years following transfer. So the receiving Canadian scheme agrees to tell HMRC about any withdrawals for ten years, so that HMRC can check whether or not you are accessing funds before you would have been allowed to under UK rules (i.e. age 55 etc.). If you do attempt to withdraw funds before age 55 you will either not be allowed to or will have a large tax bill from HMRC!
So there is nothing particularly mysterious or complicated about ROPS per se. It is merely a list of overseas schemes that HMRC recognise as agreeing to comply with HMRC access and reporting terms.
If you do decide to transfer from a UK scheme to a Canadian scheme, the Canadian scheme will have to be on the ROPS list as the UK provider will check the ROPS list. If the overseas scheme is not on the ROPS list, the UK provider will refuse to transfer. Note that some UK providers will be more familiar with ROPS transfers than others and you may have to escalate your request for a transfer to a higher authority within the provider office. UK pension schemes are required by law to advise HMRC of the details of any such transfers (using form APSS262) - so HMRC will know!
Note that if / when a transfer does actually takes place, it will be a transfer of money direct from the UK insurer to the Canadian insurer at the FOREX rate they can obtain commercially on the date of the transfer. The transfer is direct from provider to provider, it is never routed through either your bank account or you advisers bank account.
The list used to be called Qualifying Recognised Overseas Pension Schemes (QROPS), but the name was deliberately changed a few years ago by HMRC as they did not want customers to think that ‘Qualifying’ meant that HMRC were in any way recommending the scheme or had vetted the charges etc.
Note that some of the schemes listed in the Canada section are offered by well-known Canadian financial institutions. You should not expect to walk into any local branch of these institutions and find someone with an immediate understanding of ROPS transfers. Most of the large Canadian institutions have a small team in their head office who are aware of ROPS transfers and you / your financial adviser would need to refer to them to discuss the possibility of any such transfer.
 Does it matter when I transfer?
It may well matter, it all depends on your personal circumstances and plans for the future. Considerations include:
Note that you can leave your UK Personal Pension invested in the UK once you have moved to Canada (but you cannot continue to contribute). It can continue to be invested as you left it and any ‘growth’ in the value between the date you left and the date you ultimately transfer (if you do) is NOT subject to either UK or Canadian tax as it would transfer directly into a Canadian equivalent product which both governments recognise.
 Exchange rates
If a pension is transferred to Canada, it will be at the exchange rate that the transferring company can secure on the date they actually make the transfer. You have no control over the rate they might use as the funds are transferred directly from the UK company to your selected Canadian provider.
If you have retirement income already in payments from UK sources from products that cannot be transferred, you can normally make arrangements for the payments to be made directly you’re your Canadian bank account. If you do this, the payment will be converted into Canadian dollars at the exchange rate on the day of the actual transfer, so the amounts you actually receive in Canadian dollars is likely to vary each with each and every payment received. It is also possible to continue to have the payments made into a UK bank account if you continue to maintain one, then arrange for your own ‘bulk’ transfers as and when you prefer at whatever rate you can secure either from your bank of via specialist FOREX transfer companies.
 Mandatory financial advice for DB transfers
In response to the new 'pension freedoms' introduced in April 2014, in April 2015 the UK Department for Work and Pensions (DWP) introduced a requirement that individuals who have defined benefit (DB) pensions with a cash equivalent value of greater than £GBP 30,000 that wish to transfer their DB pension must obtain financial advice. This requirement applies to UK transfers to UK DC schemes, but also 'caught up' any form of transfer, including overseas transfers. A customer must demonstrate that they have received advice from an accredited UK financial adviser on the merits of any such transfer.
The problem is often that UK financial advisers do not fully understand the products or safeguards of non-UK equivalent pensions and so often cannot or will not provide such advice, or at least require that a second financial adviser is used to advise on the overseas products, leading to customer potentially having to pay for two lots of advice etc.
As at October 2016, the DWP started a consultation on this issue especially associated with overseas transfers with a view to refining the process, changing it or dropping the requirement altogether. Such consultations take months to reach a conclusion, so there is unlikely to be any change to the current requirements until mid-2017 at the earliest.
 External Links