High court ruling allows pensions to be moved abroad?

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ashambles

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The Sunday Times yesterday had a Niall Brady piece on a court case taken by someone prevented from moving a PRSA pension from Ireland to Malta. (Front page of business section.) The high court case was won by the pension holder. The pension involved was quite modest @ 116,000.

Seemingly Canada Life were blocking the move as they had no evidence the individual planned to live or work in Malta. They were saying they couldn't transfer due to Revenue rules. The judge, Sean Ryan, noted that Canada Life had a commercial interest in refusing to release the pension.

Revenue ask that the transfer be for bona fide reasons but the article refers to tax experts who say it'll be difficult for Revenue to challenge transfers as someone could move a pension because they prefer investments available elsewhere.

In any case because the pension is moving to a country the individual isn't living in should no longer be a good enough reason for a pension company to refuse a transfer.
 
I read that. I think the HC are wrong in saying that the life company have a commercial interest. It's not relevant. The Revenue have stated in no uncertain terms that they will come down on you like a ton of bricks if you transfer benefits to a foreign jurisdiction without a bone fide reason. It has always been taken that a bone fide reason was actually moving to that country and not for reasons of just liking the investment options there. Life companies have write transfer cheques to their competitors for tens of thousands of euro every day, so it makes little difference to them if it's to Malta or Aviva.

In the ruling, the bona fides ruling and Declaration to be signed was not struck down by the HC. If you are transferring your benefits to get your pension earlier or increase your tax free lump sum, it is not deemed a bona fide reason for transfer.

If you are in an occupational scheme, you cannot transfer the benefits abroad either.


Steven
www.bluewaterfp.ie
 
My understanding of the judgement is that it only referred to this particular PRSA. I don't think it can be applied to other pension structures.
In addition, I would caution against viewing this judgement as a carte blanche to transfer pension assets to overseas (more tax relaxed) structures. The costs involved can be high and there are question marks over the security/regulation of such funds. On top of that, it is not clear that the taxation of such assets (whether on drawdown or on death) is going to be more beneficial.
There are a number of (unregulated) advisors promoting such transfers. One needs to be very cautious about transferring funds to a country where the tax rules may be unclear and into the hands of "managers" who may be entirely unregulated.
 
Added to that, you will have to manage an offshore fund for the rest of your days and an offshore ARF will fall within the thresholds for CAT purposes.

I know I wouldn't advise a client to go down the Malta route. I think it is pushing tax planning to the outer limits.


Steven
www.bluewaterfp.ie
 
There was a follow on story in the Sunday Times yesterday (9 Nov 2014). I don't have the piece in front of me but it sounds as if Revenue have a new solution for people moving PRSA pensions abroad.

Revenue are now giving the go ahead to the transfer but insist that tax relief is repaid. (Unclear in the article whether Revenue calculate the year by year tax relief or just come up with a percentage of the current sum.)

I've no doubt that moving a pension abroad to a jurisdiction you're not familiar with by a company you've never heard of is highly risky. However the very fact revenue are fighting the transfers indicates to me that some people have done so successfully.

Reclaiming tax relief in this way seems a new step for Revenue, I'd prefer if they just blocked the transfer. It even makes tax relief on pensions a less valuable relief as Revenue can clearly now decide in some circumstances they'd like it back.
 
The Revenue issued a statement on Friday but it is nothing new.

If you transfer out of a PRSA, there is a PAYE charge on the transfer. There are exemptions to this where the transfer is to another approved scheme, an ARF or an annuity. If you transfer it overseas, it is not exempted and you have to pay PAYE on the full value of the transfer.

The whole thing is an tax avoidance mechanism, it's just they aren't allowed to say it as then there is no allowable reason for the transfer.


Steven
www.bluewaterfp.ie
 
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