With people traveling to and from the UK since the records began, it is not surprising that transferring a UK pension back to Ireland is a hot topic.
There are currently approximately 320,000 Irish living in the UK. Many work and are part of pension schemes. However, understanding how to transfer their pension to Ireland is where things get tricky.
This blog aims to guide you through some of the permutations involved. The process of transferring your UK pension will take time. Be patient while assessing your options.
It is important to consider all factors.
Process of transferring a pension from the UK to Ireland
There are no one-size-fits-all answers when it comes to pensions. However, should you decide to transfer your UK pension to Ireland, here is a rough guideline of the process:
- Discuss your potential pension transfer with a financial adviser in Ireland. There will be some documentation to complete to get the ball rolling.
- Send a request for transfer options from your UK provider that includes overseas transfers.
- You will need a Qualifying Recognised Overseas Pension Scheme (QROPS) information form. These forms are available on the Gov.Uk website.
- Once you have completed the forms, give them to your financial adviser. From here they can make contact with a life insurance company in Ireland.
- Your financial advisor will submit the relevant documentation.
- Once a transfer amount is received, it will be converted to Euro and a Buy-Out-Bond will be set up in your name.
- You can discuss and work alongside your financial advisor to choose a suitable investment strategy.
The beauty of having a policy in your name is it gives you full control of your investment decisions.
Although it is worth reminding yourself that transferring your pension from the UK to Ireland is not suitable for everyone. Be sure to get appropriate financial guidance from a qualified professional.
Rules and regulations are constantly changing. Ensure you take a holistic approach and long-term view. Look at your finances as a whole, not only your pension.
Benefits of transferring your UK pension to Ireland
Now that we have covered how the process of transferring your UK pension to Ireland, it is time to look at some of the benefits.
Many people work abroad but plan to eventually return home to Ireland. A lot of those who worked in the UK is no different.
Transferring your pension benefits from the UK to Ireland will allow you to have everything closer to home. It will also allow you the benefit of working with a local financial advisor who is familiar with the Irish market.
A Qualifying Recognised Overseas Pension Scheme (QROPS) potentially can accept a transfer from the UK without a tax charge. This will be scheme and rules dependent.
Inheritance planning is an important aspect of any financial planning. Pensions are no different. Leaving your pension behind in the UK could cause some difficulties for your estate. Transferring your pension benefits to Ireland could help ease the process.
Brexit has been a trending topic since the UK voted in June 2016. It has caused much uncertainty and will continue to do so. It may also make transferring your pension more difficult further down the road.
Standard Fund Threshold
Any pension benefits transferred to a QROPS in Ireland do not count towards the €2 million Standard Fund Threshold. Your Standard Fund Threshold is the maximum pension benefits you can have in Ireland while avoiding additional tax implications.
Eliminate Currency Risk
With Brexit among other factors, the economic climate is quite uncertain. Add a global pandemic into the mix and we face more uncertainty.
Transferring your UK pension to Ireland will allow you to have your fund in Euro. This will end any potential future currency concerns.
As per above, there are several benefits to transferring your UK pension back to Ireland. But, it is worth mentioning the caveat that it may not be the best option for everyone.
There is often a lot of moving parts when it comes to pensions. Take time to assess all your options and speak with a financial advisor before deciding on a course of action.
Things to consider before transferring a pension from the UK to Ireland
We have looked at the process of how to transfer your UK pension to Ireland. Now it is time to take considerations into account.
It is not a time to rush into a decision. Take time to speak to an industry expert and weigh up the pros and cons of each option.
Approval from the UK
As we touched on before, to transfer your UK pension to Ireland you will need a QROPS.. If you transfer to a scheme that is not a QROPS, you could be liable to a significant tax bill.
Be sure to discuss this with your financial adviser. If it is not a QROPS, your UK pension provider has the right to refuse the transfer. Or, you could liable to a minimum of a 40% tax bill.
There are certain criteria when it comes to taxes while considering your pension transfer. You must be a tax resident in Ireland and have ceased to be a UK tax resident within the last 5 years.
The minimum retirement age you can access a QROPS is 55. Also, all transfers received into a QROPS after 6th April 2017 are accessible if:-
- The policy owner is over age 55
- The policy owner has ceased being a UK tax resident for at least 10 UK tax years.
For all transfers before 6th April 2017, benefits are payable once the policy owner:-
- Is aged 55 or older
- Has ceased being a UK tax resident for at least 5 UK tax years.
It is worth noting that the UK tax year is from the 6th of April to the 5th of April.
Benefits transferred from the UK to Ireland will follow relevant legislation. There may be potential Captial Acquisitions Tax (CAT) bills.
These tax liabilities will vary depending on your relationship with the person you are inheriting the benefits from
Overseas Transfer Charge
There is a 25% overseas transfer charge on a QROPS transfer unless:
- The transfer is to your employer’s occupational pension scheme, OR
- It is to your country of residence, OR
- It is within the European Economic Area (EEA)
There are also additional stipulations. Should you decide to move out of the EEA within the 5 years this may affect.
As with anything pensions related, it is important to read the fine print and consult an advisor experienced in the relevant area.
As we touched on earlier, there are limits on the total capital value of pension benefits that an individual can draw from tax-relieved pension arrangements. It is referred to as the Standard Fund Threshold (STF).
Schemes are Different
Defined Contribution pension schemes in the UK and Ireland have some key differences. Be sure you understand all potential differences and what options are available.
There may also be some differences surrounding inheritability so discuss this with your financial advisor.
Uk State Pension Eligibility
With everything that has happened surrounding Brexit, UK State pension eligibility may see some changes.
Whilst the UK was part of the European Union (EU), the process was straightforward. However, as the UK has left the EU, this process may change. It is worth researching the eligibility criteria in more detail.
With Brexit in full effect, we may see more and more people return home from the UK in the coming years. This will leave many wondering about their UK pensions from previous employment.
We help clients transfer their UK pensions to Ireland using Qualifying Recognised Overseas Pension Schemes (QROPS).
A QROPS is a pension arrangement that was set up in conjunction with both the UK and Irish Revenue rules. In most cases, a QROPS allows you to transfer your pension benefits from the UK to Ireland without tax consequences.
Benefits of a QROPs
Transferring to a QROPS in Ireland will have several benefits such as:-
- A pension scheme administered by a local financial advisor. This will allow you the convenience of local advice along with someone familiar with the market.
- You eliminate any currency risk by transferring to Euro.
- The UK ‘overseas’ charge we discussed earlier does not apply to QROPS.
Finding an advisor who is familiar with the process of transferring a UK pension will be vital. It can be quite a labor-intensive process.
It is also worth noting that transferring your pension to Ireland might not be the best course of action. Some schemes in the UK may also not permit a transfer.
Finding the right advice
Between Brexit and all the jargon within the pensions industry, finding the right advice can be difficult. With the UK having now left the EU, there is some uncertainty as to whether pension legislation may change in the future.
Perhaps you have pension benefits in the UK and are uncertain of what to do. However, you should consult advice from a Qualified Financial Advisor (QFA).
Not only someone qualified but also who will explain everything in simple terms. The fewer acronyms used the better is a good rule of thumb.
Our advisors have over 100 years of combined industry experience. Even with all this experience, the client is always front of mind and the process is always explained from the start.
Transparency is the key to guiding clients through the pension transfer process.
Pension transfers and UK pension transfers, in particular, can be tricky. We have discussed the different variables and considerations.
How long does a transfer take?
This will depend on various factors. The UK pension scheme administrator will likely play an important role.
With these things there is a lot of paperwork involved. It is advisable to allow between 12-16 weeks to complete the process.
However, this is a guidelines and some may be completed in a shorter timeframe.
Fees associated with a UK pension transfer
There is no exact figure on how much a UK pension transfer will cost. Although our advisors will be upfront and transparent with regard to any potential fees.
As a ballpark figure, you can expect to pay approximately €3,000 for the QROPS process to be completed.
Your Next Steps?
Hopefully, this blog provided you with some clarity going forward. The process of transferring a UK pension to Ireland can be tricky.
Transferring is not automatically the default correct option for everyone. We all have different circumstances to be assessed.
Enlist the help of a qualified expert. Someone who knows the process and can guide you through it.
We offer a complimentary consultation and would be happy to help. You can chat with a qualified advisor and if they feel there are aspects they can help you with you can take it from there.
The PSL Team.
*This blog should be used for information only and not taken as financial advice.