If a pension plan is transferred to an RRSP and the beneficiary dies, the investments can be transferred, tax free, to the surviving spouse. Tax will eventually be paid from the estate when the spouse passes on but the remainder will be available for beneficiaries. In the UK there could be a survivor’s pension (sometimes paying only half of the original pension). Once the spouse passes on, payments usually stop and there is nothing to leave to beneficiaries.
Growing your Pension Faster
When you leave a company and its pension plan, your pension entitlement normally increases by the lower of inflation or some small percentage – often 2 or 3%. If you bring your funds to Canada, you can invest the money in a way that could exceed these returns and provide a bigger pension.
Avoiding Exchange Rate Risks
If you leave your UK pension plan outside Canada, you will eventually receive payments from it in local currency. You will have the expense of converting each payment to Canadian dollars or every time you need the money. If you retire in Canada most of your expenses will be in Canadian dollars. All of the time you are enjoying your pension payments you are subject to swings in exchange rates. If you are lucky your income will be worth more than your expenses but what happens if the reverse is true?
You can remove this uncertainty by having your pension fund assets (income) and liabilities (expenses) in the same currency.
If you have more than one pension plan, you may be able to consolidate them into a single retirement savings account. You will have great flexibility over the mix and type of investments held in your account but you will have the simplicity of receiving regular reports on a single statement and will only have to deal with one administrator.
With most pension plans, you must start to draw the pension on a fixed date e.g. age 60 or 65. You may be required to purchase an annuity. Once your monies are transferred to a retirement fund in Canada, your investments can basically be left to grow, tax free, until you need them. There are few restrictions and no requirement to purchase an annuity but you can certainly do that if you wish.
Most pension funds give you little or no choice in how your funds are invested. Working with a fully qualified, registered financial adviser, you can create a portfolio that suits your needs perfectly. You can invest in just about anything that suits your appetite for risk (or the lack of it!).