Who is this suitable for?
- Many Irish people have spent several years working in the UK and may have amassed some deferred pension benefits either through an ‘Occupational Pension’ plan or their own personal UK Pension Plan. If that individual has returned to reside in Ireland and intends to retire here then it makes a lot of sense from a flexibility, ease of administration and pension consolidation to re-patriate their UK pension to Ireland.
- For UK nationals who have moved to Ireland for work or family reasons and have decided to ‘put down roots’ in Ireland- moving their UK Pension Benefits to Ireland is a strong consideration
Are all UK Pensions transferable to Ireland?
- This depends on whether they are Public sector pensions, some public sector schemes are transferrable but many are not and the state pension cannot be transferred.
- Most private sector pensions (Occupational and Personal Pensions) are transferable.
- UK ‘Defined Benefit’ schemes have more rigorous rules attaching – with any value over £30,000 requiring advice from a UK regulated Financial Advisor, we work with affiliated partners to meet this requirement.
- UK ‘Defined Contribution’ schemes are more straightforward and do not require the involvement of a UK Regulated Financial Advisor.
What is a QROPS
- This is a Qualifying Regulated Overseas Pension Scheme (‘QROPS’) that is approved by the UK’s HMRC (UK’s Revenue & Customs) as a suitable pension structure to transfer the owner’s UK pension benefits to Ireland
How is this facilitated?
- A QROPS is a suitable UK HMRC approved vehicle to bring UK Pension Benefits back to Ireland and if the rules and documentation process are followed and applied this can result in the pension owner having no liability on their UK pension transfer to the UK taxman. This UK pension then forms a part of his/her total Irish Pension benefits and can then be accessed for both tax-free cash and as regular taxable retirement Income.
I am Irish resident, if I choose the QROPS route, when can I access this Pension?
- If you have returned from the UK, and are aged 55 or over, you can start to access QROPS pension benefits at any time you select.
- If you are less than 10 years out of the UK, then you are still eligible to re-patriate your UK Pension Benefits to Ireland, but the Irish QROPS will still be responsible for reporting any tax liability to HMRC and in this case some providers in Ireland may not allow you to drawdown any benefits until you reach the 10 year period. If this is the case there are other routes you can look at that will allow you to drawdown your benefits as long as you have attained age 55 and Imperius Wealth can assist you as to the most appropriate way forward.
I have an Irish Occupational Pension (current employment) and a Personal Retirement Bond (previous employment), can I access the QROPS in the same manner at my chosen retirement date?
- Yes, at your selected time, you can choose to consolidate the total of all 3 pension types above and take 25% of these funds tax free. (to a max. tax free individual limit of €200,000). With the remaining 75% of your funds, you can then choose either the
a) Approved Retirement Fund (‘ARF’) / AMRF
b) Annuity pension– like a public sector pension.
It is essential that you take appropriate advice when transferring your UK pension and there are pitfalls to be avoided, taking the wrong action can result in high tax penalties.
a) Overseas transfer tax of 25% of the fund (UK Finance Act 2017)
Overseas transfer tax is avoided if either the following conditions are satisfied
1) The member is resident in the same country as which the QROPS vehicle is set up, or
2) The member is a resident of an EEA country and the QROPS is set up in an EEA country.
b) Unauthorised Payment tax – can be between 40-55% of the QROPS value. This is easily avoidable if the access rules remain a minimum of age 55 and that the QROPS is registered with HMRC, so it’s important that the correct solution is selected and that you don’t enter into a scheme that seeks to circumnavigate these rules.
Benefits/Disadvantages of a QROPS
|1. Can be used to consolidate all UK Pensions to re-patriate to Ireland||1.Only a few Irish based Pension providers have a QROPS vehicle|
|2. Can be used to avoid a UK tax liability on access – once owner adheres to and completes documentation process accurately||2.Documentation process is detailed|
|3. Suitable for most pension types; Occupational, Personal Pensions, SIPP’s (UK pensions)||3.Strict adherence to HMRC rules required to reduce possibility of a UK tax liability arising|
|4. Can facilitate the transfer of a UK Defined Benefit pension – (with certain requirements) – as well as Defined Contribution pensions||4. An Irish QROPS is not advisable for a person who intends to retire in another EU country (not in Ireland) – specific advice is required for a tax effective pension planning. In this case other overseas QROPS solutions or an international SIPP may be a more effective solution in this case.|
|5. All UK pension pots over the current 20/21 lifetime allowance (£1.073m) are subject to a tax charge on the excess amount over this figure of up to 55%. A QROPS allows the individual to avoid this if the scheme is currently on or below this amount and is expected to grow over the coming years. A UK pension transferred to a QROPS pension can grow in Ireland up to a €2m limit (Standard Fund Threshold) before a 40% excess tax rate applies. This is a potential tax saving of hundreds of thousands of Euros, assuming the pension grows up to the current €2m threshold.||5.Irish retirement funds have a minimum imputed distribution, currently 4% p.a. (via ARF’s), while the UK system does not require forced withdrawals in retirement. This means that in some cases even though you are not taking an income there could be a tax liability.|
|6. The Irish SFT limit is €2m materially higher than the UK’s £1.073m (this is the current figure which increases each year in line with inflation)|
|7. Some QROPS providers allows the transferred funds to be kept in STG, convertible at the owner’s option, although to avoid exchange rate risk it may be better to hold in the currency you intend to spend it in.|
|8. For larger pension pots, any UK pension transfer does not eat into the SFT limit, for e.g. If a person transfers home a UK fund of €200,00 equivalent – they can still build additional Irish pension assets up to €2m without having to pay excess tax (@40%)|
|9. If the beneficiary of an inherited UK Pension scheme is not UK resident, this can be problematic and adds extra administrative layers to the process- a QROPS can alleviate this complexity.|
Summary & Action
I specialise in helping individuals review the benefits and drawbacks of transferring a UK pension to Ireland, we also look at alternative solutions to transferring your UK scheme should an Irish QROPS be unsuitable and can help you make the most suitable choice for your particular requirements.
If you would like to discuss your situation and the options available please e mail me at firstname.lastname@example.org and I would be happy to schedule a 15 minute initial chat at my expense to help you achieve your retirement goals.