Many thousands of Irish people who over the years emigrated to the UK in search of work, have now returned home. We take a look at the key considerations involved in transferring pension benefits to Ireland. There is a lot to think about, and the most appropriate strategy for you will depend on your own specific circumstances. Your financial advisor will be able to help in making any decisions.
For most individuals there are three key benefits to a transfer.
First is the convenience factor, dealing with an Irish pension provider or indeed a local financial advisor should be more convenient if you intend to retire in Ireland together with the fact your fund will be valued and/or paid in euros.
Secondly, in looking at succession planning, where on your death your dependants are not living in the UK, leaving your pension there may be more complicated to deal with. You should seek tax advice relevant to your own inheritance circumstances.
Thirdly, there is the €2m Standard Fund Threshold (SFT) in Ireland when at retirement, any excess over the SFT is subject to income tax at 40%. Any transfers from a UK registered pension scheme, do not count towards an individual’s SFT.
So what are the main considerations of a transfer? This is where it can get a little complicated!
Approval from the UK
In order to transfer your pension from the UK to Ireland, you will need to transfer it to a Qualifying Recognised Overseas Pension Scheme (QROPS). The result of transferring to a scheme not QROPS approved is an Unauthorised Payment Tax, a UK tax charge of up to 55%.
Transfer pre-requisites are that you are tax resident in Ireland and that you ceased to be UK tax resident within the last five UK tax years.
The minimum retirement age on a QROPS is 55. Additionally, all transfers received into the QROPS after 6th April 2017 can only be accessed where you have not been UK tax resident for at least 10 UK tax years prior to accessing pension benefits.
If a payment is made within 10 years of the start of the QROPS, the QROPS provider must report the transaction to HM Revenue and Customs within 90 days. Payments made as a result of normal retirement, ill health retirement, transfer to another policy or death are also reported.
Overseas Transfer Tax
There is a 25% overseas transfer charge on a QROPS transfer unless it is to your employer’s occupational pension scheme, Ireland as your country of residence or within the European Economic Area (EEA).
Policy benefits or guarantees
With the assistance of your financial advisor, it is important to check if there are any guarantees attaching to your UK pension before any transfer is instructed.
You should check with your UK provider as to the type of pension you have, and the options that are open to you at retirement from that pension policy. It is important to bear in mind your retirement options may change if you transfer your pension to Ireland.
If you transfer to Ireland, death benefits payable will be treated as preserved and payable in full to your estate with Capital Acquisitions Tax (CAT) applicable depending on your relationship to the beneficiary.
A transfer of your UK pension is a technical matter and you should obtain expert advice in order to ensure that any transfer results in the best possible outcome for you. The transfer considerations may seem daunting and complicated but once the necessary steps to avoid any negative tax consequence are taken, the process is quite straightforward. It is essentially the transfer of benefits from one pension provider to another, albeit that one of the pension providers is based in the UK.
At Cantor Fitzgerald, we offer a broad range of tax approved pension structures and investment options. We understand the variety of needs that individuals face in terms of their longer term goals to retirement and beyond.
Laura Reidy is Head of Pensions with Cantor Fitzgerald.
To speak with a Portfolio Manager or Account Executive, please phone the Cantor Fitzgerald dealing desk on 01 633 3633.