Ireland and the UK have always had a close relationship, with many Irish people often ending up working in the UK for long periods of time, thus building up ‘pension pots’ which still remain in the UK when they repatriate back to Ireland. Individuals are unaware of their options when it comes to these pensions they hold in the UK (as well as other jurisdictions), and are often faced with difficult complex decisions which require expert financial advice.
You can transfer most private sector pensions but most public sector pensions cannot be transferred. Some people may look to transfer their UK pensions to Ireland for convenience or administrative ease, but you should always speak to a financial advisor before making such a decision in order to gain a better understanding of the full range of options available to you, as there are many factors depending upon each individual’s specific financial circumstances which need to be considered.
What are the advantages of transferring a UK pension to Ireland?
Transferring your pension makes sense if you are planning on retiring in Ireland, for example, ease of management. You will also be able to use a local financial advisor who can advise on domestic pensions and structures.
You may also wish to convert all the funds into Euro; however, we would always recommend keeping the funds in sterling as this will ensure you maintain an element of currency diversification within your overall retirement pot, particularly if you are not nearing retirement age at present. Furthermore, with Sterling quite weak at the moment (added to the fact Boris Johnson has just been elected as PM of the UK at the time of writing with a clear direction to lead UK out of the EU and thus put more pressure on sterling) in our view, now is not a good time to convert out of sterling. Like many aspects within financial planning, timing is important, and relying on one day in your lifetime to get a healthy forex rate exposes you to sizeable risk. Having the ability to maintain your pension pot in sterling is therefore extremely important. Some providers have the multi-currency functionality within their product offerings to enable you to do this.
Standard Fund Threshold
Any pension savings that are transferred to a QROPS* in Ireland are not taken into account towards the €2 million Standard Fund Threshold, which is the maximum pension amount you can save for in Ireland without hefty taxes being applied. Pension savings earned in Ireland are only taken into consideration.
*QROPS stands for "Qualifying Recognised Overseas Pension Scheme". A QROPS is a pension scheme which is not based in the UK but meets specific criteria set by the HMRC in the UK.
Leaving your pension in the UK can make it more difficult for your estate to deal with in the event of your demise. Transferring your pension to Ireland can make for prudent family wealth planning.
If you keep your pension in the UK, a paid-up DB scheme or as a preserved benefit won’t provide a death benefit entitlement, it will only provide a pension for a dependent in the event of your premature death. If you transfer it to Ireland, the transfer value or value of the pension on the date of death is payable to your estate as a lump sum, passing freely to a spouse or in event of no spouse will be distributed in accordance with your will. Primarily, your pension won’t be liable to UK inheritance tax.
What are the disadvantages of transferring a UK pension to Ireland?
Tax-Free Lump Sum
In Ireland, you can access 25% of your fund as tax-free cash up to a maximum of €200,000 lifetime limit per person. However, in the UK you can take up to £250,000 of a tax-free lump sum. The UK fund threshold is £1 million so the value of the pension pot needs to be considered.
What should I consider before transferring my UK Pension?
Accessing your pension.
The minimum retirement age on a UK Transfer is 55. You can only access your benefits before age 55 on the grounds of ill health.
- For transfers received into a QROPS after 6 April 2017, benefits can be paid if you have not been a UK tax resident for at least 10 UK tax years.
- For transfers received into a QROPS before 6 April 2017, benefits can be paid if you have not been a UK tax resident for at least 5 UK tax years.
If benefits are paid outside these rules, UK tax rules will apply and you may be subject to UK tax on your QROPS.
You must intend on remaining a tax resident in Ireland for 5 years after you have accessed your benefits.
Defined Benefit Schemes
If your UK Pension is a defined benefit scheme, a UK advisor will need to be involved which can create further fees. The age of the individual, their personal circumstances and the cash equivalent transfer value will all be taken into consideration at an early stage if it is appropriate to proceed to the next stage of engaging a UK advisor.
What are the steps involved in a UK Pension transfer?
- Discuss the transfer with your Irish financial adviser to determine if a UK pension transfer is suitable for your individual circumstances.
- Your financial advisor will carry out market research and recommend the best course of action, outlining the reason for his recommendations within his proposals put forward.
- Request a transfer options form from your UK provider that includes an overseas transfer option.
- Your financial advisor will guide you through the completion of all the relevant forms and will also monitor the transfer proceedings ensuring the transfer is completed without delay.
- This pension will then be managed and reviewed by your financial advisor in conjunction with any other holdings for which they are the appointed servicing agent, thus being able to advise you with ongoing advice as part of you overall financial plan.
- Throughout this process, the advice will be concise and fees and charges will be transparent and fully disclosed.
What Type of Plan Can I Transfer Into?
Some, occupational pension of your current employer will be able to accept a UK transfer. The UK transferring scheme will require it to be QROPS/IROPS approved, and listed with the HMRC before they will consider it.
Alternatively, you can transfer to an Irish Buy Out Bond/Personal Retirement Bond in your own name, where you maintain control over your investment rather than being bound by the trustees of the scheme it is in now. This opens up further investment opportunities as you will have access to a broader range of funds.
If you have a personal pension fund in the UK and are currently self-employed in Ireland, you could transfer your UK pension into an Irish personal pension plan in Ireland as a lump sum addition. This can be a top-up to an existing arrangement or else a new one can be set up.
All transfers from the UK to Ireland must be into a Qualified Recognised Overseas Pension Scheme which is approved by the HMRC and the Irish Revenue.
What Retirement Options do I have with my new Irish Pension?
On the retirement of an Irish pension, you can take a 25% cash lump sum and with the balance, you have the following options:
- Buy a guaranteed pension income for life (an annuity)
- Invest in an ARF / AMRF Fund
- Drawdown the entire fund as taxable cash
- Choose a combination of these options
Want to Find Out More?
Each case is unique and brings with it its own financial planning challenges. Please contact OpesFidelio Ireland Ltd to see if transferring your UK pension would be advantageous for your individual circumstances.