18 October 2000 External T.I. 2000-0028145 - UK PENSION TO RPP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Can an amount be transferred from a United Kingdom pension arrangement into a registered pension plan?

Position:

A determination can only be made on the basis of the facts present in a given situation. In general it appears that a UK local government pension scheme is a pension plan and paragraph 60(j) of the Act could apply to permit a transfer to be made on a tax free basis under Canadian tax law.

Reasons:

General documentation available on such schemes appear to support a position that they are pension plans for the purposes of paragraph 60(j) of the Act.

XXXXXXXXXX 		2000-002814
W. C. Harding
October 18, 2000

Dear XXXXXXXXXX :

Re: Transfer of funds from a United Kingdom (U.K.)
Pension Scheme to a Registered Pension Plan (RPP)

This is in reply to your letter of May 25, 2000, in which you asked if an amount could be transferred from the above noted arrangement to an RPP.

As discussed during our telephone conversation of August 28, 2000 (XXXXXXXXXX - Harding) since your letter deals with a specific proposal to transfer funds from one plan to another we can only provide written confirmation of the tax implications inherent in the transactions if it is the subject matter of an advance ruling request submitted in the appropriate manner. However, we can provide the following comments which are of a general nature and are not binding on the Canada Customs and Revenue Agency (the "CCRA" or the "Agency"). Should you wish to obtain an advance ruling you can find information on how to apply for an advance tax ruling in our Information Circular 70-6R3 dated December 30, 1996 which can be obtained through your local tax services office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. If a ruling is requested please note that the fees were recently amended and all ruling requests received after August 1, 2000 are subject to a new fee of $100. for the first 10 hours and $155. for each additional hour. A deposit of $535. is also required.

The Income Tax Act (the "Act") provides a number of specific provisions for the transfer of funds between registered pension and retirement savings plans. However these provisions only apply to a transfer of amounts out of a registered pension plan and not transfers from a foreign pension or retirement arrangement On the other hand, an amount may still be transferred to an RPP from a foreign plan under the provisions of paragraph 60(j) of the Act where the provisions of that paragraph are satisfied.

Paragraph 60(j) of the Act provides for a deduction in the calculation of an individual's income of an amount that is transferred to an RPP where the amount has been received from a foreign pension plan and has been included in the recipient's income. It does not provide any rules on whether an RPP may accept such a transfer. However, this is not generally of concern where the transfer is simply being used as a means of paying for the buy-back of prior years service as permitted under the terms of the RPP. The Agency's views regarding the transfer of amounts from non-registered pension plans to RPPs are found in Interpretation Bulletin IT-528 "Transfers of Funds Between Registered Plans". This bulletin may be obtained from your local tax services office or on the internet at the above-noted web site. Paragraph 26 of the bulletin discusses the application of paragraph 60(j) of the Act and indicates that a deduction is available for the transfer of a superannuation or pension benefit from a non-registered pension plan where:

• the amount transferred was for services provided by an individual in a period throughout which that individual was not resident in Canada;
• the individual is required to include the amount in the person's income for the year under subparagraph 56(1)(a)(i) of the Act;
• the amount is not part of a series of periodic payments; and
• the transfer is made in the year the amount is included in the individual's income or within 60 days after the end of the year.

Paragraph 60(j) of the Act also provides for the transfer of amounts to an RRSP under which the individual is the annuitant where the same conditions are met.

In your submission you indicated that your inquiry concerns a transfer of funds from a UK arrangement described as the Local Government Pension Scheme provided by the London Pensions Fund Authority. It is a question of fact whether an amount received out of or under this arrangement will be a superannuation or pension benefit for the purposes of subparagraph 56(1)(a)(i) and paragraph 60(j) of the Act. However we have reviewed a "A Guide to the Local Government Pension Scheme" published in March 1998 and available on the internet at http://www.lpfa.org.uk/lpfaweb/ and based solely on the information provided therein, are of the opinion that the arrangement may properly be described as a pension arrangement and that any amounts paid from the arrangement would represent income received from a pension plan for the purposes of subparagraph 56(1)(a)(i) and paragraph 60(j) of the Act.

Please note that the CCRA cannot comment on the application of UK tax law in respect of this matter and cannot advise whether any taxes will be payable to the UK upon transfer of the amount out of the foreign plan.

We trust this explanation will be of assistance to you.

Yours truly,

P. Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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