Both Brexit and the growth in the Irish economy relative to the UK are encouraging emigrant workers to return to Ireland. Consequently, Irish pension providers are seeing an increase in people moving their pensions back to Ireland.
Transferring a pension to Ireland may not suit in every circumstance and not every UK scheme will permit it, so it’s important to take advice. Laws and tax rules may change in the future, restricting access to your UK pension.
What people need to consider when transferring their pension plans
Qualifying Recognised Overseas Pension Schemes (QROPS)
1. QROPS are a pension transfer arrangement that are in line with both UK and Irish Revenue rules. They let people transfer pension entitlements from the UK to Ireland without tax consequences in most circumstances.
2. Irish pension providers have QROPS approved plans to facilitate transfers into Ireland.
3. Transferring to a QROPS in Ireland can bring advantages, particularly post Brexit. Your scheme will be administered by a local provider subject to Irish pension rules, giving you convenient access to local advice. You remove potential currency risk by having your plan denominated in Euro.
4. The UK has a penal ‘overseas’ transfer tax (at least 40%) which do not apply when the transfer is made to a QROPS.
5. There are detailed rules and reporting requirements for QROPS with which the pension provider must comply. For example, you cannot retire before age 55 unless the retirement is due to ill health.
6. It is important when taking benefits from a QROPS to ensure that it does not trigger a UK tax charge. In some circumstances there may be a 25% tax for non-compliance.
7.Payment of benefits on death from a UK pension scheme can be complicated for non-residents.
Advantages when compared to leaving your pension benefits in the UK
1. Advice and Administration
The ability to access professional local financial advice relating to a pension administered in Ireland from an Irish advisory firm can greatly simplify future interactions with your pension fund. It is far more convenient for you to have your pension fund administered by an Irish pension provider.
2. Flexible Access to UK Pension
On retirement, subject to certain restrictions, you can take a 25% cash lump sum and with the balance, subject to Revenue rules, you can:
– Invest in an Approved (Minimum) Retirement Fund (ARF)
– Draw down the entire fund as taxable cash
– Buy a guaranteed income for life
You may also choose a combination of these options.
By transferring your pension to Ireland you can often benefit from an increased level of flexibility as to how and when they decide to access your retirement fund.
3. Currency Risk
Clients reduce the risk of pre- and post-retirement currency issues by transferring their pension to a fund denominated in Euro.
Particularly in light of the current uncertainty surrounding Brexit in the UK, Sterling/Euro currency movements may impact negatively on the overall performance of the pension fund before they take retirement benefits. Transferring their pension to Ireland removes an additional risk of currency movements impacting post retirement income.
4. Advice at Retirement
When you come to draw retirement benefits from the pension there is a need for clear advice regarding longevity, investment and inflation risk.
Managing these risks while maximising potential returns for post-retirement funds is key to ensuring adequate provision for clients’ essential income needs in retirement.
Laws and tax rules may change in the future, post Brexit. Any changes to legislation may result in the options not being available to you at retirement, restrictions on access and higher taxation.
For more information or to arrange a meeting to discuss your UK pension transfer, please contact Gallivan Financial today. We’ll be happy to help.
All the best,
The Team at Gallivan Financial