Transferring a Personal Retirement Savings Account overseas

We’ve previously written about moving Irish pensions abroad.

 

While Personal Retirement Savings Accounts (PRSAs) are covered by the legislation allowing for the transfer of PRSAs overseas, there is an omission in the legislation which causes a tax issue on their transfer.

 

The short version is that a PRSA transfer is regarded as an emolument which is subject to PAYE (40%) & USC (8%) according to Section 787G of the Taxes Consolidation Act 1997.

 

By omitting a transfer to an “overseas arrangement” from the “Non application of PAYE” section, and charging Schedule E & USC, the Irish Revenue is effectively forcing the PRSA contributor to repay the tax relief which they were afforded when contributing to their supplementary Pension before the funds will be transferred.

 

Due to the fact that a PRSA holder will lose 48% of their Pension value on the transfer, and the fact that the remaining 52% remains in a pension which will be subject to income tax on the withdrawal, we are not comfortable with any PRSA transfers proceeding.

 

But all of this may change in the not too distant future. Irish residents will soon be able to benefit from a new EU wide retirement saving plan known as a Pan European Pension Product or PEPP(hyperlink to blog 2 below).

 

According to the Report of the Interdepartmental Pensions Reform & Taxation Group 2020 Ireland intend on using a reformed version of the Personal Retirement Savings Accounts as the Pan European Pension Product.

 

One of the main features of the PEPP is European pension market, is the so-called ‘portability’ feature provided for in the PEPP Regulation.

 

When using the portability service, PEPP savers are entitled to retain all advantages and incentives granted by the PEPP provider and connected with continuous investment in their PEPP.

 

This should mean that the tax that the PRSA administrator must deduct prior to the transfer will not be allowed under the terms of the PEPP Regulations.

 

If you have a PRSA and have tried to move it overseas, please get in touch with Johnny Mulholland or any of the team in Imperius Wealth Ltd and we would be happy to guide you through this whole process to see how we can help you.

Johnny Mulholland

Johnny Mulholland

Senior Financial Planner

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