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Gabriel Lalonde
June 07, 2024

Transferring your UK pension to Canada using QROPS

If you’re from the UK, reside in Canada, or plan to relocate or retire here, you might want to know what you can do with your UK pension. You can leave your pension in the UK and take payments according to the pension’s payment schedule. Another option can be to transfer it to Canada, depending on the type of pension you have. HMRC (His Majesty’s Revenue and Customs) allows certain kinds of overseas pension transfers using a QROPS (Qualifying Recognized Overseas Pension Schemes).

Transferring a UK Pension Overseas

Not all UK pensions are eligible for an overseas transfer. You cannot transfer a state pension, or an unfunded public sector defined benefit pension. NHS pensions can be challenging to move from the UK as well.

Types of pensions eligible for overseas transfer are:

  • Defined contribution pensions
  • Private sector defined benefit pensions
  • Funded public sector defined benefit pensions
  • Self-invested personal pensions (SIPPs)
  • Small self-administered scheme (SSAS)

Benefits of a QROPS pension transfer

Transferring your eligible UK pension is not only a straightforward process but also a secure one. If you have relocated to Canada permanently and plan to spend your retirement here, there are several advantages to transferring your UK pension.

You must put your funds from a QROPS pension transfer overseas in a similar pension scheme. In Canada, that’s a Registered Retirement Savings Plan (RRSP). The benefits of these plans are:

  1. You have control over your investments. Working with your advisor, you can choose investments to help you meet your retirement objectives.
  2. When you move your pension funds to Canada, you eliminate currency risk. Foreign exchange rates won’t affect your money, so you’ll know exactly how much you’ll have to work with.
  3. Your plan can roll over tax-free to your spouse if you pass away.
  4. You can choose your beneficiary or beneficiaries for the funds in the plan, avoiding probate and estate fees.
  5. You control how much money you take from the plan. You must withdraw the minimum amount by the end of the year you turn 71, but you can withdraw higher amounts if you like.

Having all your funds in Canada makes it easier to keep track of your finances for taxation and administrative purposes. If you pass away, it’s also easier for your heirs to settle your estate.

There are some potential downsides to transferring your pension, such as:

  • Depleting your funds too quickly.
  • The possibility of a 25% tax on excess amounts.
  • Your investment choices could be riskier than those in your UK pension.
  • UK inheritance laws may be more favourable than Canadian inheritance laws.

Steps to complete a QROPS transfer:

Depending on your situation, it could be beneficial for you to transfer your pension. So, how do you do it? First, you must be 55-71 for a QROPS transfer. If you are younger than 55, you can explore all the pension options available to you so you can plan ahead. Our advisors at MDL Financial Group will review your options with you to help you decide what to do with your UK pension once you turn 55.

If you meet the age requirement, your steps for a QROPS pension transfer are as follows:

  1. Meet with a financial planner who’s knowledgeable about transferring a UK pension. They will advise you on the tax implications, benefits, and possible drawbacks of moving your pension to Canada.
  2. Depending on the amount of your pension, you may need to meet with an independent financial advisor in the UK to review the transfer and discuss the implications of moving your money.
  3. If you proceed, your financial planner will open an RRSP for you and complete the necessary paperwork.
  4. The advisor will submit the paperwork to facilitate the transfer.
  5. The money will typically be sent by wire transfer, although it can also be sent by cheque.
  6. Once the funds arrive, they’ll be deposited into your RRSP and invested in the investments you choose with your financial planner. These investments are either mutual funds or segregated funds.

Your QROPS can transfer to Canada in several weeks or a few months, so starting the process as soon as possible is important.

How We Can Help With Your QROPS

MDL FinancialGroup is an Ottawa-based financial planning firm. We have over 30 years of experience helping our clients achieve their financial goals by recommending the best solutions for their needs. Please call us at 613-416-9649 or fill out our online form for a free consultation. We’ll work with you to understand your needs and help you transfer your UK pension if that’s the right choice.

FAQS

How much does a QROPS transfer cost?

There’s no fee to transfer your pension from the UK to Canada. You may pay a fee if you need a review from an independent financial advisor in the UK. If your financial advisor is fee-based, you’ll pay a fee for their services but won’t have additional costs for a QROPS transfer.

How long does an overseas pension transfer take?

It can take as little as a few weeks or several months.

What are my options when I get the money?

You must deposit the funds into an RRSP to avoid any taxes. Any money taken out of the pension will be taxed. Investment options within the RRSP are mutual funds or segregated funds.

Is transferring my UK pension to Canada a good idea?

Transferring your pension has benefits, but it’s best to talk to a financial planner familiar with QROPS to make the best choice for your circumstances.

If you liked this article, you may want to read these three:

https://mdlfinancialgroup.ca/swift-transition-from-accumulation-to-decumulation/

https://mdlfinancialgroup.ca/segregated-funds-and-the-protection-they-offer-from-a-volatile-market/

https://mdlfinancialgroup.ca/our-clients/retiree/

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