When Carole Besley left Britain for Canada, she thought her company pension plan would have to be left in the UK, until she hit 65 and transferred any allowances to Ontario. Then she thought she would have to pay tax on any cash transferred, as she had been told she would have to do with other investments brought here. Carole also wondered if the UK pension amounts might be taxed in BOTH countries.
“Imagine my surprise when I found out the UK pension could be transferred here without tax being levied in either country – and it could be put in an RRSP here, without tax as well. It was also NOT going to reduce any pension contributions I am entitled to make here,” she says.
Under a 2004 UK and Canada joint tax treaty any pensions earned in Great Britain and Ireland can be transferred into an RRSP here without any impact on your pension rights and can grow tax free until taken as part of your Canadian retirement income. But why is it almost a secret?
The answer is because many investment companies and business executives in the UK, as well as tax revenue officers here, are unaware of the 2004 UK Parliamentary Act authorizing them. There is also a detailed and complex process by which company pensions are transferred here, BEFORE it can be invested. Even when officials find out, they often fail to realize that transfers have to be made within a time span of one year and monitored for five years by the receiving bank.
However, the Canadian owner can draw up to 10% a year from the plan and is able to have the transfer process managed and invested with the help of their own financial advisor, if they wish.
“It’s a shame that it seems so few emigrants know about this process, or the UK Act of Parliament which allows transfers, especially as when people arrive from Great Britain, they often don’t earn much in CPP allowances in their early working years here,” says Carole.
“I know groups like the Canadian Alliance of British Pensioners have been battling for years to try to get those UK State Pensions paid here linked to inflation, but even when they win, it will still not bring any back-payments. Getting a lump sum from your old UK employer is a much better bet in terms of helping you live your retirement here.”
Another hurdle which seems to be a barrier to Canadian ex-Pats claiming old pension rights from former UK employers is the fact that many of them went out of business, or were denationalized, or privatized, as Brits say. However, there seems to be little realization by the ex-UK citizens that although many large operators, (public and private transportation for example) were acquired by conglomerates, or shut down for various reasons in the 1980s and 90s, but their liabilities and responsibilities for continuing payments were assumed by the succeeding companies.
“I worked for a whole number of different coach companies in the central area of Wales and western area of England and they were swallowed up by a large national operator, so I’ve been trying to find out who took them over and therefore who owes me those pensions now,” explained Alan Soden of Burlington.
The key to finding a UK pension you may have left behind, if you made a swift exit from Britain to take up a new opportunity in Canada, is the UK National Insurance number – issued at birth, it should be among your old documents.
You can then decide if you want to contact the employer(s) yourself. If you have the time you can write and hope you will be given help from your old colleagues and guidance, or hand it over to a professional adviser with experience in transferring and investing such plans.
Submitted by Derek Coomber, Pension Quest Intl. For more info on “Forgotten UK Pensions”, call Derek to set up a free 30-minute consultation for CARP Members. Email [email protected] 905-338-1795
