Has anyone transferred his/her pension to Malta?

jasdpace@gmail. said:

The way you're angling your last few posts it's as if you think that I'm arguing that all advisers should know all details of all countries at all times.

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If that's not what you're suggesting, then what exactly are you suggesting? You brought up Malta. If I start recommending Malta to my clients, then how would I know that there's not some other country that might be even better? If I don't do due diligence on all countries and products, then I wouldn't know. If I didn't know that, then by recommending Malta I might not be offering the best solution. Maybe some other country is better than Malta.

As you started this thread, please let us know what you think Irish advisers should be doing.

Surely the role of the advisor is to give advice on Irish products and the client obtains advice on products in the jurisdiction they are considering moving to from local advisors in that location.

The client can then make an informed decision on which option is best.

Wow, this thread has degenerated! Which is a pity because the original question is an interesting one.
It's obviously going to be a niche service and it would be highly unreasonable to expect all, or even most, Irish advisors to offer such a service.

However, that being said, I have been intrigued by a sort of "below the radar" approach by a small number of providers and advisors who are offering the service. It's almost as if they're saying yes we can do this, but we don't want to draw too much attention to it. Which is odd.

There also has been very little reference to the Michael O'Sullivan v Canada Life case, which the Irish High Court held that an employment or residence relationship with the transferee country (eg Malta) was not necessary for the transfer to be bona fide. That would seem to have been a game changer, but yet, it seems there's been no huge increase in interest by pension providers and clients.

So, perhaps back to the original question. Has anyone done this, and how did you get on? Or has anyone explored the possibilities and decided not to to go ahead and why?

Baby boomer said:

Wow, this thread has degenerated! Which is a pity because the original question is an interesting one.
It's obviously going to be a niche service and it would be highly unreasonable to expect all, or even most, Irish advisors to offer such a service.

However, that being said, I have been intrigued by a sort of "below the radar" approach by a small number of providers and advisors who are offering the service. It's almost as if they're saying yes we can do this, but we don't want to draw too much attention to it. Which is odd.

There also has been very little reference to the Michael O'Sullivan v Canada Life case, which the Irish High Court held that an employment or residence relationship with the transferee country (eg Malta) was not necessary for the transfer to be bona fide. That would seem to have been a game changer, but yet, it seems there's been no huge increase in interest by pension providers and clients.

So, perhaps back to the original question. Has anyone done this, and how did you get on? Or has anyone explored the possibilities and decided not to to go ahead and why?

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While you show the case and it states residence relationship or employement was NOT necessary for the transfer to be bona fide. In that instance what would make it bona fide to proceed with it.

I have no legal back ground, so I don't know, but I could imagine just because it says they are not necessary for it, that there is still a requirement for it for it to be bona fide and without a legal back ground I wouldnt be happy if I had to argue the case that it was without them.
If someone is legit moving there etc fine, but if not and want to try avail it is a grey area I feel and that is why it isn't shouted from the roof tops by advisors.
Just my opinion but doesn't help with any answer.

Baby boomer said:

There also has been very little reference to the Michael O'Sullivan v Canada Life case, which the Irish High Court held that an employment or residence relationship with the transferee country (eg Malta) was not necessary for the transfer to be bona fide. That would seem to have been a game changer, but yet, it seems there's been no huge increase in interest by pension providers and clients.

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TheGoodTheBad said:

While you show the case and it states residence relationship or employement was NOT necessary for the transfer to be bona fide. In that instance what would make it bona fide to proceed with it.

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The case judgement only gives us a teaser, but it seems the bone fides related to concerns around the economic climate, though it's not entirely clear. It seems the main thrust of the case related to the 'relevant benefits' of the Maltese scheme.

The court also considered the implications of the bona fide requirement for overseas transfers. Although Revenue argued that PRSA providers should examine the circumstances surrounding a declaration signed by a transferee to ensure that it is what it appears to be, the Court found that in circumstances where the provider had no reason to suspect the bona fides of a transaction, the Transfer Regulations do not require a PRSA provider to conduct an independent examination and evaluation of the motives of the PRSA holder. The Court found that unless there was something which caused the provider to be suspicious of the bona fides of the request, the provider is free to proceed with facilitating a transfer request. The court did indicate, however, that it was not prepared to lay down a general rule in this regard and that everything would depend on the circumstances of a particular case.

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There are two ways to move one’s pension to Malta:

1) The conventional way (i.e. ‘Michael O’Sullivan vs Canada Life’)

2) Via ITC’s IORPS structure

Everything in life has risk. My own view is that if your own endgame is to land in Portugal in the very near future, the main risk in relation to ‘Option 1’ is counterparty risk. Some of the main protagonists in this space have family members who’ve literally stolen their clients’ money. ‘Sins of the Father’ etc, but when it comes to one’s life savings, please forgive me if I’m uber cautious.

Option 2 is interesting and predicated on Aidan McLoughlin’s view that the Treaty of Rome (i.e. ‘Free Movement of Capital’) facilitates complete pensions freedom. Intuitively, it sounds right, but ‘caveat emptor’ as with all things of this magnitude, and come into it armed with your own tax advisor (who isn’t ‘Johnny Down the Road’).

The basic plan is that one’s pension gets moved to Malta under either Option 1 or Option 2. Then the issue is accessing it.

Malta allows a 30% tax-free lump sum (with no cap) and then doesn’t tax drawdowns. Portugal doesn’t tax the lump sum and taxes drawdowns at 10%.

Ireland looks to tax everything for the first three years (under ‘ordinary residence’) unless you’ve sold your house and moved lock, stock and barrel to Portugal (for the pedants out there, I’m well aware that it’s more complex than that, but this isn’t a tax conference).

So the plan is:

- Move the pension to Malta
- Move to Portugal
- Retire the pension in either Year 1 or Year 4 depending on one’s circumstances

Interesting, Gordon, thanks for that.
When you say Ireland taxes everything for the first three years of ordinary residence, do you mean that even the 25% permitted by Ireland is included in that?
Also, if you are non-resident, but ordinarily resident, are you not exempt from income tax on income arising totally outside Ireland - which a transferred pension would surely be?

Baby boomer said:

Interesting, Gordon, thanks for that.
When you say Ireland taxes everything for the first three years of ordinary residence, do you mean that even the 25% permitted by Ireland is included in that?
Also, if you are non-resident, but ordinarily resident, are you not exempt from income tax on income arising totally outside Ireland - which a transferred pension would surely be?

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No, ‘ordinary residence’ (i.e. the three year ‘tail’) covers worldwide income and worldwide gains with a couple of carve-outs for employment income and de minimis amounts.

"the 25% permitted by Ireland" is only from Irish pension schemes. A lot of people feel that the lump sum from Maltese pensions that was derived from Ireland is subject to full income tax. As Gordon alludes to, a specialist tax advisor in the area should be consulted.

Oisin19 said:

"the 25% permitted by Ireland" is only from Irish pension schemes. A lot of people feel that the lump sum from Maltese pensions that was derived from Ireland is subject to full income tax. As Gordon alludes to, a specialist tax advisor in the area should be consulted.

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Yes.

Some people have a view that you can access a Maltese pension scheme on preferential terms whilst still living in Ireland.

I wouldn’t share that view.

It all makes sense if your plan is to live in Portugal, if you’ve done your due diligence on the counterparties, and if you have a decent advisor. In the absence of any one of those three points, it’s a disaster waiting to happen.

Gordon Gekko said:

Yes.

Some people have a view that you can access a Maltese pension scheme on preferential terms whilst still living in Ireland.

I wouldn’t share that view.

It all makes sense if your plan is to live in Portugal, if you’ve done your due diligence on the counterparties, and if you have a decent advisor. In the absence of any one of those three points, it’s a disaster waiting to happen.

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completely agree. unless you are going abroad I wouldn't even consider it.

I am reminded of Celtic Tiger years when lots of people bought property in Bulgaria, Cape Verde etc. Most would struggle to find either location on a world map, knew little of the property laws, taxation rules etc.

Conan said:

I am reminded of Celtic Tiger years when lots of people bought property in Bulgaria, Cape Verde etc. Most would struggle to find either location on a world map, knew little of the property laws, taxation rules etc.

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I once pulled up the world map in a meeting and asked the client to show me where Malta was. hadn't a clue and yet wanted to move his pension there

Oisin19 said:

"the 25% permitted by Ireland" is only from Irish pension schemes. A lot of people feel that the lump sum from Maltese pensions that was derived from Ireland is subject to full income tax. As Gordon alludes to, a specialist tax advisor in the area should be consulted.

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Interesting indeed. If a specialist tax advisor were to be consulted on the specific issue of whether 25% of a Maltese pot is taxable at Irish marginal rates, does anybody know what the advisor might say?
Would that not contravene principles of EU law? I should say I'm no expert in the area, but there seems to be great lack of information for a layman to even start thinking about this.

Gordon Gekko said:

It all makes sense if your plan is to live in Portugal, if you’ve done your due diligence on the counterparties, and if you have a decent advisor. In the absence of any one of those three points, it’s a disaster waiting to happen.

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We should get this printed on the side of cigarette packets!

It's very important.

It is indeed, Brendan but where do you find a decent advisor - i.e. one who is competent in this area? Is it just the "big 4" or are there niche providers with sufficient depth of knowledge? Who do financial advisors refer people that wish to explore this area (cross border financial planning) to? What has been the outcome?

Not a tax expert but here is my perspective on potential disadvantages -

One should also consider possibility (albeit small) of European Union breaking up and that would mean staying in Malta forever to access funds. Who would have thought UK will leave EU, leaving thousands of UK pensioners stuck in Spain for rest of thier lives. And who would have thought there could be a war on the door step of EU. Not to mention pandemics are real and can happen again.

In difficult times, for me, money saving (from tax man) isn't of much value than overall worth of staying near your family and friends.

Very valid commentary but it could be years before Europe breaks up, if at all......in which case, one may very well have had the time to take appropriate actions. My fledgling understanding is that Malta (or elsewhere) does not have to be a forever home for pension funds and could potentially be used as a stepping stone in an overall strategy. That's why an earlier comment about just (read as: exclusively) seeking product advice in individual countries made absolutely no sense to me.........what's for sure needed is a very detailed strategy where all the dots are definitely joined by someone capable! Product advice is important but is a long-distant second to planning/strategy in all of this........the best products in the world won't be much good if the strategy is flawed.

Yes, although the fund isn’t in Malta for all that long so the risk of EU breakup isn’t high (for example, the Brexit ‘journey’ took 4/5 years.

Plus, if the risk you’re worried about is EU breakup whilst the fund is in Malta, accessing it whilst in Portugal is not predicated on EU law; it’s based on the Portugal/Malta Tax Treaty which is standalone.

I'd first of all like to thank Gordon for all the info.

For my sins, I was on the Pension Board site yesterday - they have a guidance note on overseas transfers. As I went through this, I realised that I don't know some very, very basic stuff, as follows.

1. What type of pension plans is it possible to transfer to another European country - as in retirement annuity, PRB, PRSA, occupational schemes?

2. What type of pension plan must the receiving scheme be - IORPS, QROPS, etc?