If you worked in the UK in the past and have a pension entitlement which you are considering bringing back here, you may find the following useful.
It’s important when considering this that you ensure that you don’t incur a tax liability when transferring these benefits to Ireland. This means that you must use a product which is approved by the UK Revenue as a Qualifying Recognised Overseas Pension Scheme (QROPS).
A QROPS can accept transfers from company pension schemes and personal pension arrangements in the UK. Even though the product is approved by HMRC as a QROPS which (subject to certain conditions) eliminates any initial negative tax consequence, the UK Revenue impose additional rules which mean that their tax treatment can potentially follow the fund for a period after the transfer takes place.
The two main taxes which could apply if you get this wrong are as follows;
Unauthorised Payment Tax
- The UK Revenue reserve the right to have UK Taxation applied to the funds in a number of scenario’s. The first of which is known as the unauthorised payment tax which can be between 40% and 55% of the value of the fund. This tax can be levied by the UK revenue if a payment is taken from a QROPS before age 55 or if at the time a payment is taken, the policyowner was resident in the UK in that year or any of the previous 10 UK Tax Years*.
Overseas Transfer Tax
- The second potential tax is known as the Overseas Transfer Tax. This taxation can be up to 25% of the fund and can be applied at the point of transfer of a UK Pension to the QROPS and also within the 5 year window thereafter if the conditions required by HMRC are not satisfied. The taxation will not apply if either of the below scenario’s are satisfied; 1) The member is resident in the same country in which the QROPS receiving the transfer is established, or 2) The member is resident in a country within the EEA and the QROPS is established in a country in the EEA.
* as the UK tax year runs from 6th April to the 5th April, this will generally be greater than ten years
It is important that you obtain advice from an adviser with experience of cross border transfers.
Accessing Your QROPS
Access under the QROPS is limited to age 55 (or earlier if in ill health) to comply with UK pension rules and providing that you have stopped being a UK tax resident for at least 10 UK Tax Years. Salary and service lump sums are not available as these have been phased out in the UK. Ordinarily you will be entitled to a Lump Sum of up to 25% of the value of the fund with an option to invest in an ARF or purchase a pension annuity with the residual fund. It is important to note that lump sum’s taken from a QROPS product in Ireland will be subject to the lifetime limit of €200,000 and taxable thereafter at the rates prescribed by the Irish Revenue.
As part of the process it is important that you review the rules around accessing your QROPS and how this differs from the rules if you left it in the UK. We can assist with this.
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Warning: The value of your investment may go down as well as up. You may get back less than you invest.
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© Eoghan Gavigan 13 November 2021