International Pension Transfers

What is a Pension Transfer?

A pension transfer refers to the process of moving pension savings or benefits from one pension scheme to another. This transfer can occur within the same country but can be done internationally.

 

What is an International Pension Transfer?

An overseas pension transfer, also known as an international pension transfer, refers to the process of moving pension savings or benefits from a pension scheme in one country to a pension arrangement or scheme in another country.

Whether it is allowed or not will depend on the rules and regulations governing the pension schemes involved. Pension transfers are typically done for various reasons, including consolidating pensions, accessing different investment options, or relocating to another country.

Under IORP II rules, people are entitled to transfer their Occupational Pension Schemes and PRSA’s* pension arrangements overseas to similar arrangements if certain criteria is met.

*There is a tax charged on transfer pertaining to PRSA’s and it may not be in the best interest of the client.  We recommend that each client is reviewed on a case by case basis to ascertain what the most appropriate course of action is for their personal circumstances.

It is worth noting that Buy Out Bonds, Personal Pensions and Approved Retirement Funds (ARFs) are landlocked and cannot be transferred to other EU states in most circumstances, although Personal Pensions and Buy Out Bonds can be transferred to the UK in some instances under QROPS (Qualifying Recognised Overseas Pension Schemes) legislation.

This means that pension planning for those that do not plan on staying in Ireland is imperative as there can be issues down the line for non-Irish residents when accessing their Irish land-locked pension products. The main issue is that Ireland retains the taxing rights on withdrawals from some Irish pension products which can lead to double taxation, i.e. a tax liability in Ireland and also a tax liability in the country of residence.

Some Irish pension products are therefore not suitable for non-domiciled individuals or those that do not intend to stay in the country in later life.

 

What is IORP II?

This is a comprehensive EU directive that looks to harmonize the governance and management of pension schemes across the European Union.

 

What are the benefits of IORP II?

• Provide better protection through enhanced governance and risk management.
• Provide clear, relevant and more consistent communication to members of pension schemes.
• Remove barriers to cross border occupational pension schemes.
• Ensure that trustees have the appropriate powers to supervise the schemes

 

Why would you consider an International Pension transfer?

Consideration should be given to transferring your Irish pension overseas if:

• You are no longer living in Ireland or plan to take up residency somewhere else in the future.
• You previously worked overseas and built up pension benefits which need to be consolidated.
• You are an international executive and you can fund pension benefits in other jurisdictions.

 

What are the Revenue’s Requirements for Overseas Pension Transfers?

The Revenue requires that the transfers must be to an IORP II-regulated scheme established in an EU state.

For transfers outside of the EU, the pension holder must be a resident of the state they are transferring to and the pension structure must be similar to the Irish pension structure.

All pensions must be Bona Fide and should not be done in order to circumnavigate tax. Revenue approval will not be needed if the transfer is to an IORP but may be in transfers to other pension structures.

 

Can I Transfer My Pension to Another Country?

It is possible to transfer an Irish pension to another country under certain circumstances. The ability to transfer a pension will depend on the specific type of pension you have in Ireland and the rules of the pension scheme.

If the pension can be transferred, it is generally up to the receiving scheme as to whether it can be accepted or not.

 

What type of Pensions can be Transferred overseas?

Occupational Defined Contribution (DC) Pensions - If you have a DC occupational pension, it may be possible to transfer it overseas, subject to the rules of the pension scheme and any legal or regulatory considerations.

Occupational Defined Benefit (DB) Pensions - you may be able to take a transfer value from this scheme and transfer this amount to another jurisdiction. Advice would need to be sought in this respect as it is a complex decisions.

Personal Retirement Savings Accounts (PRSAs) -They are designed to be portable and can usually be transferred to another country, however, there will be a large tax charge in most instances which doesn't make this an attractive option.

Why would I consider transferring my pension?

There are several reasons why someone might consider transferring their pension overseas:

1. Relocation: If you are planning to move or have already moved abroad permanently or for an extended period, transferring your pension overseas can consolidate your retirement savings into a pension scheme in your new country of residence. This can make it easier to manage your pension from abroad and potentially benefit from more favorable pension regulations or tax treatment in the new country.
2. Access to Better Investment Options: Some pension schemes or jurisdictions offer a wider range of investment options compared to others. By transferring your pension overseas, you may gain access to investment opportunities that are not available in your home country, potentially leading to better returns or diversification of your pension portfolio.
3. Currency Considerations: If you anticipate retiring in a country with a different currency than your home country, transferring your pension overseas can help mitigate currency risk. By holding your pension in the currency of your retirement destination, you can protect against fluctuations in exchange rates that could affect the value of your pension income.
4. Consolidation and Simplification: If you have pension savings scattered across multiple schemes or countries, consolidating them into a single pension scheme overseas can simplify administration and make it easier to track and manage your retirement funds.
5. Better Pension Rules and Benefits: Different countries have varying pension rules and benefits. Transferring your pension overseas may allow you to take advantage of more flexible withdrawal options, lower taxes, or other benefits provided by pension schemes in the new jurisdiction.
6. Exit from a Defined Benefit Scheme: In some cases, individuals may choose to transfer out of a defined benefit pension scheme (which provides a specific income in retirement based on salary and service) into a defined contribution scheme to gain more control over their pension savings or due to changes in employment circumstances.
7. Pension Freedom: Some individuals prefer to have greater control and flexibility over their pension savings. By transferring to an overseas scheme, you may have more options for how and when you can access your pension funds compared to the restrictions of your home country's pension system.

It's important to note that overseas pension transfers can have significant implications, including tax consequences and regulatory considerations in both your home country and the receiving country. Before deciding to transfer your pension overseas, it's advisable to seek professional advice from a qualified financial advisor or pension specialist who can assess your individual circumstances and help you navigate the complexities involved in pension transfers.

 

Where can I transfer my pension?

Where individuals meet all the criteria, we have found Malta to be a suitable jurisdiction to transfer pensions to as it has a similar legal system to Ireland and has been a player in the international transfer market.

 

What are the key benefits of transferring an Irish pension to Malta?

There are a number of key reasons why people consider transferring their pensions to Malta:

1. English Speaking - Mata is an English-speaking financial center that has transposed European Union Pension rules into their pension regulation.
2. Access from 50 - You can access your pension at 50 if you have lived overseas for 5 years already.
3. Investment Choice - There is access to a wide range of investment opportunities, however, occupational pension schemes are governed by the strict investment principles of IORPS II.
4. Double Taxation Agreements – Malta has around 70 Double Tax Treaties (DTA’s), for residents of countries that have a DTA with Malta. This means that the pension holder shouldn't be subject to the double taxation risk that is present with withdrawals from an Approved Retirement Fund (ARF)
5. 30% tax-free lump sum - This is higher than the current Irish and UK tax-free lump sum of 25% (Irish pensions capped at a tax-free lump sum of €200K and UK pensions capped at £250K tax-free lump sum). It should be noted that a maximum of €200K is the lifetime limit on pension lump sums in Ireland if you remain an Irish resident.
6. Tax-Free Growth - No Tax to pay on assets within the scheme (with exception of immovable property in Malta).
7. No forced withdrawals - once the lump sum has been taken from the pension scheme, the pension holder is not forced into withdrawals like they are with an Irish ARF product.
8. Estate Planning - You can nominate beneficiaries on your pension. You can pass on your pension pot to your beneficiary upon death without any Capital Acquisition Tax / Inheritance. However, the beneficiary may be subject to tax depending on the rules of the country in which they are tax resident.
9. No Lifetime Allowance Charge - there is no upper limit on the pension pot that you can accrue like in Ireland where there the standard funding threshold is €2 million.
10. Consolidation - You can combine various smaller pensions into one large pot resulting in only one annual management fee as well as the opportunity to benefit from the economies of scale by combining investment.
11. Currency Conversion - Avoid ongoing currency exchange fees in investing in the same currency as the country you reside in or in any currency of your choice.

 

Want to find out more?

Please contact us if you would like to discuss your unique circumstances and to see if it an overseas transfer would be beneficial.

 

The Central Bank does not regulate Tax Advice, Qualified Recognised Overseas Pension Schemes or Estate Planning.

The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.