2021-0919071E5 Transfer of an amount from a UK pension plan

Principal Issues: Whether a lump sum pension benefit received by a resident of Canada out of a defined contribution portion of a UK pension plan can be transferred to an RRSP pursuant to subparagraph 60(j)(i) of the Income Tax Act in the circumstances.

Position: Yes, provided all the conditions of the provision are satisfied.

Reasons: Based on the wording of the legislation.

Author: Pietrow, Victor
Section: 56(1)(a)(i); 60(j)(i); Canada-U.K. Income Tax Convention

February 2, 2022

XXXXXXXXXX                                                                   2021-091907
                                                                                           V. Pietrow

Dear XXXXXXXXXX:

RE: Application of subparagraph 60(j)(i) of the Income Tax Act

We are writing in response to your email of November 18, 2021 regarding the application of subparagraph 60(j)(i) of the Income Tax Act1 to the transfer of an amount received by a resident of Canada from a pension plan established in the United Kingdom (UK) to a registered retirement savings plan (RRSP) in Canada.

We understand the specific facts of the situation to be as follows:

• An individual resident of the UK (the Taxpayer) moved to Canada and became a resident of Canada for purposes of the Act on October 1, 2020.

• While a resident of the UK, the Taxpayer was a member of an employer-sponsored UK pension plan (the Plan). Employer contributions were made to the Plan based on years of service.

• The Plan has two separate components: (1) a defined benefit component calculated based on years of service up to May 31, 2021 (which includes service from October 1, 2020 to May 31, 2021 while the Taxpayer was a resident of Canada); and (2) a defined contribution component to which no employer or employee contributions were made since 2016.

• The Taxpayer received a lump sum amount from the defined contribution component of the Plan in 2021 which will be included in income as a pension benefit for that year pursuant to subparagraph 56(1)(a)(i).

You have asked for our views as to whether the Taxpayer would be eligible to transfer this lump sum amount to an RRSP in the 2021 tax year (or within 60 days after the end of the year) pursuant to subparagraph 60(j)(i), notwithstanding that the defined benefit component of the Plan includes service while the Taxpayer was resident in Canada.

1 Unless otherwise indicated, all references are to the Income Tax Act.

Our comments

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R11, Advance Income Tax Rulings and Technical Interpretations.

In general terms, subparagraph 60(j)(i) permits a deduction for a pension benefit received by an individual from a unregistered pension plan, such as a foreign pension plan, that is transferred to the individual’s RRSP, subject to certain conditions being met. These conditions are outlined in paragraph 26 of Interpretation Bulletin IT-528, Transfers of Funds Between Registered Plans.

Of specific concern to you (given the recognition of Canadian service for several months under the defined benefit component of the Plan) is the condition that the pension benefit received must be attributable to services rendered by the individual (or the individual's spouse or common-law partner or former spouse or common-law partner) to an employer in a period throughout which the individual was not resident in Canada.

In our view, provided the Taxpayer is able to support the fact that the lump sum receipt was made entirely from the defined contribution component of the Plan and therefore wholly attributable to service rendered by the Taxpayer in 2016 or earlier while a resident of the UK and not a resident of Canada, that condition would be satisfied. The burden of proof, however, would rest with the Taxpayer to demonstrate that no portion of the lump sum receipt was made from the defined benefit component of the Plan.

Please note that we have based our comments on your determination that the Plan is a pension plan for the purposes of the Act. We make no assertion in this regard as this determination is ultimately a question of fact.

We trust that these comments will be of assistance.

Yours truly,

Kimberly Duval, CPA, CA
Section Manager
for Division Director
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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