In the last five years, I have been transferring UK pensions to Canada for clients. During that time I have been interviewed for articles on the subject, and have been contacted by people from all over Canada, with questions about the process. Several of the people who have contacted me have tried finding answers through other British Expats, or searching online, or asking at their local financial institution. This is often a frustrating experience, as there is not a lot of information available, and sometimes the information you find can be unreliable.

I have heard from several Expats who went to their financial advisor or bank with questions, only to be very disappointed. In some cases, their financial institution had not been approved by the HMRC to do transfers. In other cases, they were on the approved list, but the employee had no experience in the area, and had no idea where to begin. More than once I have heard from someone whose advisor said they could do the transfer, and started the process, only to give up before completion. Their excuses were that they ran into a problem that they didn’t know how to fix, or they didn’t realize how much work was involved, or their financial institution decided that they didn’t want to deal with UK pension transfers anymore. These clients were kept in the dark about what was happening with their pensions, and had months of their time wasted.

The process of having your pension transferred does not have to be so frustrating or complicated. You just need to enlist the services of someone who has the required knowledge and experience, and who is willing to put in the time and effort for you.

This is a very specialized field, so seek out an expert.

In the coming weeks, I will be writing an article about frequently asked questions I receive on UK pension transfers. Please send me your questions, and I will try to reply to everyone directly. Some questions (and the corresponding answers) will be included in my article.

Writers Bio: This column, written and published by Investors Group Financial Services Inc. (in Québec a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances.

For more information on this topic please contact Shannon Walker, CFP at 1-888-291-7024 or Shannon.walker@investorsgroup.com.

Maybe that’s because a comfortable retirement is something we take for granted but when you look at the many benefits available to Canadian retirees – benefits not available to retirees in many other countries – it’s clear we have much to celebrate.

• All wage earning and self-employed Canadians are eligible to receive either Canada Pension Plan or the Québec Pension Plan (CPP/QPP) retirement benefits, which are indexed for inflation. There are also CPP/QPP survivor and dependents’ benefits as well as a lump sum death benefit. A couple can choose to share CPP/QPP benefits for tax purposes.
• Canadians can take advantage of the tax-deferred, compound growth benefits of Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). Any Canadian resident who receives periodic payments from a registered pension plan can potentially reduce their taxes by splitting pension income with a spouse/common-law partner. Those over age 65 who receive RRIF income are also eligible for the federal and provincial Pension Income Credit and can allocate up to 50% of their RRIF income to a spouse for tax purposes.
• Those who have lived in Canada for at least 40 years after age 18 will receive the full monthly Old Age Security (OAS) benefit, which is indexed for inflation. Canadian residents who have lived in Canada for at least 10 years after age 18 will receive a prorated OAS monthly payment.
• Seniors with a lower income may be eligible for the Guaranteed Income Supplement (GIS), a tax-free monthly payment, which is indexed for inflation.
• Canadians can invest in Tax-free Savings Accounts (TFSAs) that generate tax-free investment income that does not affect income-tested federal benefits.
• Every tax-eligible Canadian gets the Basic Personal Tax Credit and those over age 65 also receive an Age Credit. Other tax credits that can benefit retirees include the Medical Expense Credit, the Dependent Credit, the Disability Credit, and the Caregivers Credit. There are also generous tax credits for those making charitable donations.
• And, of course, Canadian retirees have access to a wide range of health care services at little or no direct cost.

Yes, Canada is a great place to retire! But to make your retirement all it can be, you need a plan that includes retirement income from other sources such as your company or personal pension plan and your own investments. Your professional advisor can help make sure your first day of retirement is as much a cause for celebration as the first day of July.

Writers Bio: This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact Shannon Walker, CFP at 1-888-291-7024 or Shannon.walker@investorsgroup.com.

Should you contribute to your RRSP, your TFSA or both?

The introduction of the TFSA represents the most important change to the way Canadians save money since RRSPs were launched in the late ‘50s. The big question on many people’s minds is whether they should contribute to a TFSA, the tried-and tested RRSP, or possibly even both? Before shedding some light on their question, let’s first get a firm grasp on some of the innate differences and similarities. First and foremost, both RRSPs and TFSAs provide investors with the opportunity of tax-sheltered compound growth for investments held inside each plan. Unlike an RRSP, contributions to a TFSA are not tax deductible, but amounts can be withdrawn tax free at any time and withdrawn amounts are added back into your TFSA contribution room the following year.

Now that we’ve established their unique characteristics, let’s get back to our original question: Which is best? On a very basic level, looking at your pre-retirement and expected post-retirement marginal tax rates can provide you with an idea how to best allocate your investments. If you expect to be in a lower tax bracket during retirement, contributing to an RRSP is generally more beneficial. However, if in retirement you anticipate being in a tax bracket that is equal or higher than your pre-retirement tax rate, the TFSA may be more tax-efficient.

Although it’s tempting to settle on a simple rule-of-thumb, the decision on whether you should use a TFSA or RRSP is not that simple – your advisor needs to work with you to consider the entire spectrum of financial strategies at your disposal that could ultimately impact your approach. Even if you anticipate having a lower marginal tax rate in retirement, maximizing your RRSP contributions may not always be the most tax-efficient long-term strategy. Since RRSP withdrawals (directly or through your Registered Retirement Income Fund (RRIF) or an annuity) increase your taxable income, those withdrawals may affect certain government income-tested benefits and credits such as the Old Age Security benefit and the Age Credit.

On the other hand, if your expected marginal tax rate in retirement is equal or higher than during your accumulation years, contributing to your TFSA may not be the best approach either. For example, RRSPs that are converted to a RRIF or an annuity after age 65 can produce income that is eligible for the pension income tax credit, and thus qualifies for pension income splitting with your spouse. Other income splitting strategies such as the use of spousal RRSPs could effectively distribute a portion of your taxable income to a spouse with a lower marginal tax rate in retirement, further reducing your tax bill and reducing the claw-back effect on your income tested benefits and credits.

So where does this leave us? Generally speaking, a TFSA may be better suited for shorter-term goals, such as an emergency fund or saving for a major purchase, since there is no tax on withdrawals and these plan withdrawals are added back into your TFSA contribution room the following year. However, for long-term objectives, RRSPs are generally the vehicle of choice since there are strong incentives to keep your money invested, such as taxes and lost contribution room on the withdrawals from an RRSP. The TFSA can also be a powerful retirement savings tool. However, due to the ease with which TFSA savings can be accessed (no taxes on withdrawals or loss of contribution room) only a disciplined investor who can resist the temptation to dip into their savings prior to retirement will fully benefit from its potential as a source of retirement income.

Remember, there is no one-size-fits-all solution. In fact, there is a multitude of variables that must be taken into consideration. In many cases, the TFSA should be used as a complementary product, along with your RRSPs, as they both have their own advantages. Your personal savings strategy needs to take into account your unique circumstances as well as your short and long-term objectives. To discover which approach is best for you, contact me.

Andrew Filice, CFP Call me on 1-800-561-0659 or email me at andrew.filice@investorsgroup.com

Find out more about us by clicking here

“Being mentally and socially active is important at any age, and we are happy to see that these are the main reasons Canadians continue to work after they retire, says the report.

“For the number of Canadians who feel they will not be financially prepared to retire we understand that planning for retirement can often be overwhelming and we want to help Canadians invest for their future so they can achieve their ideal retirement.”

It's important to plan ahead for your retirement

The study found that 56 per cent of Canadians think they will need less than one million dollars to fund their retirement, half of whom believe they will need less than$300,000. More than one-quarter of Canadians (28 per cent) think they will need between one and two million dollars and 16 per cent believe they will need two million dollars or more to fund their ideal retirement.

“While there’s no magic number that Canadians should be aiming for when saving for retirement, it’s important that Canadians are realistic about how they plan to spend their retirement and how much it will cost,” says the report.

“Whether it be $250,000 or$1,000,000, it can be daunting to think about needing such a large sum of money, so it is equally important for Canadians to consider how much they can afford to put away for retirement and understand what that amount will mean for them down the road.”

When it comes to how they plan to spend their retirement, the majority of Canadians plan to travel (86 per cent), spend time with family and friends (72 per cent), read (61 per cent) and exercise (60 per cent). Other retirement plans include taking up a hobby (50 per cent) and going back to school (24 per cent).

As for saving for retirement, three-quarters (78 per cent) of those expecting to retire are currently putting money away for their future and they have been doing so for an average of 15 years. Half of Canadians (55 per cent) who plan to retire report saving less than $20,000 over the past five years.

“We all know that it’s important to invest for our future, but with so many demands on our time and money it can be easy to put off saving for a goal that often seems far away.”

While the bulk of money for retirement will come from RRSP contributions and savings (78 per cent and 68 per cent respectively), many Canadians indicated their retirement would also be funded by money from the government (63 per cent), their work pension (55 per cent) or inheritance (27 per cent). A small number of Canadians expect to have retirement money come from the lottery (five per cent) or their kids (four per cent).

For more information about investments and pensions please click here

158,000 British Pensioners living in Canada have their British pensions frozen without any cost of living increases.  Meanwhile, pensioners living in the United States, Israel, Philippines, Slovenia, Bosnia-Herzegovina, any European Union country, as well as many more, receive annual cost-of-living increases the same as the increases they get if they lived in the UK.

The UK is the only western nation which denies parity to all state pensioners regardless of where they live. The Canada Pension Plan (CPP), for example, gives annual increases to pensioners no matter where its pensioners choose to live in Canada or not.

With rising costs of living, this situation has put many pensioners in an extremely difficult financial state.

John Markham, a British Pensioner living in Ottawa and spokesperson for the International Consortium of British Pensioners, said, “David Cameron has pledged to make pensions fair for all and we applaud that goal. When all British pensioners, no matter where they live, including these brave veterans, win the right to have their pensions raised annually like everyone else we will know he has been true to his word.”

British veterans living in Canada ready to hand medals back

Many British veterans living in Canada and other Commonwealth nations are so outraged at their abandonment by the British government that they are prepared to hand back their medals.

“After 50 years of injustice it has come to the stage where men and women who fought for this country feel so abandoned that they would renounce their hard won war medals,” said Markham.

“Cashing a pension check that is the same amount as the first one received in 1989 Twenty-four years ago won’t buy the turkey this year in Canada,” said Alan May, veteran of the British Merchant Navy now living in British Columbia.

May came to Canada to join his two sons and five grandchildren in his declining years. He never imagined that his pension would be frozen. “Four years I spent dodging torpedoes for King and Commonwealth and there is no good reason why they refuse to index our pensions like those in other countries around the world,” May said.

The UK State Pension is similar to the CPP where the value of each pension reflects the number of years of contributions paid. There are currently 12-million UK state pensioners, all of whom contributed similarly to the UK state pension via compulsory National Insurance Contributions.  Approximately one-million of these live outside the UK.

About the Canadian Alliance of British Pensioners and the International Consortium

The Canadian Alliance of British Pensioners (CABP) is a not for profit organization  with over 11,000 members, dedicated to securing annual cost-of-living increases for all recipients of the UK State Pension, regardless of where they choose to live in retirement.

The Canadian Alliance of British Pensioners, in association with other similar pensioner organizations in Commonwealth countries has formed the International Consortium of British Pensioners (ICBP) to fight this inequity.