21 July 1995 Internal T.I. 9515627 - TFR UK PPS TO RRSP

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:

Whether transfer from U.K. personal pension scheme eligible for tax-deductible contribution to RRSP. (this is a follow up of 7-950330)

Position TAKEN:

Based on limited information, no

Reasons FOR POSITION TAKEN:

It would appear that transfer would be from a personal retirement arrangement (similar to our RRSPs) and not from an unregistered pension plan attributable to employment while not resident in Canada.

			July 21, 1995

OTTAWA TAX SERVICES HEADQUARTERS
P. Middlestead, Director M.P. Sarazin
957-3499
Attention: Cathy Payette
ITPS, Audit
951562

XXXXXXXXXX

This is in reply to your memorandum of June 6, 1995 wherein you requested that we review the additional information submitted by XXXXXXXXXX on his U.K. Personal Pension Scheme (the "PPS") in order to help you determine whether the amounts in the PPS are transferable to a registered retirement savings plan ("RRSP") under paragraph 60(j) of the Income Tax Act (the "Act"). In our earlier memorandum of April 28, 1995, we were only able to provide you with very general comments because the taxpayer was not able to provide us with sufficient information regarding the PPS. Unfortunately, the additional information submitted by XXXXXXXXXX is an earlier version of the document submitted with your memorandum of February 6, 1995. XXXXXXXXXX was contacted by telephone on June 16, 1995 and he advised us that the PPS contained funds transferred from a former employer's pension scheme, funds from the State Earnings Related Pension Scheme ("SERPS") and his own personal contributions. XXXXXXXXXX stopped contributing to the plan when he returned to Canada in 1993.

We have reviewed chapter 30 of the 1994-95 Butterworths UK Tax Guide (the "Text") relating to pensions. As a result of pension reform in the U.K. in the late 1980s, new approved personal pension schemes became available to all employees as well as the self-employed as of July 1, 1988. In addition, laws were passed to allow tax-free transfers between approved plans and to allow and encourage individuals to contract out of the SERPS. We will highlight some of the other general characteristics of U.K. personal pension schemes expressed in chapter 30 of the Text.

(a)Individuals may contribute up to a certain percentage of their net relevant earnings to a personal pension scheme where the rate varies from 17.5% for those under 36 years of age to 40% for those aged 61 or over.

(b)An individual may opt out of his employer's pension scheme but where an individual continues to participate in the employer's pension scheme, his earnings from the employment will not be relevant earnings and he may not be able to establish a personal pension scheme.

(c)An employer may contribute to an individual's personal pension scheme but the annual combined contributions by the individual and the employer may not exceed the individual's net relevant earnings percentage limit.

(d)In the case where an individual contracts out of SERPS, the employer and employee continue to pay national insurance contributions on the same basis as if the employee was contracted in but the DSS will pay the contracted out rebate plus any incentives to the personal pension scheme. However, the amount paid into the plan by the DSS are not taken into consideration in applying the net relevant earnings limit that may be contributed to the plan by the individual. The condition which must normally be met for an employee to be contracted out of SERPS is that the private scheme provides not less than a "guaranteed minimum pension" (i.e. broadly the additional state pension payable if the employee continued to participate in SERPS).

(e)There is free transferability between personal pension schemes and the other kinds of retirement schemes.

Based upon the limited facts available regarding the PPS and the general information concerning the U.K. personal pension schemes, it would appear that the PPS is very similar to an RRSP. If this is in fact the case, we are of the view that the PPS would be considered a personal retirement arrangement and, as stated in our earlier memorandum, there is no provision in the Act that would allow for a tax-deductible transfer of the funds held in the PPS to an RRSP.

We trust the above comments will be of assistance to you.

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch