Non residents - risk of no ARF option

VInterested said:
Hi, did you find out more about this issue?
I have done some research and i know that very few EU countries will accept a transfer of an ARF furthermore (Malta yes, Spain and France no unless its a DB pension) no one will offer you in Ireland an ARF if you are a non-resident.
Ive been told by my Occupational Pension provider that the advice given to their members in other companies is to eventually buy an annuity or use an Irish bank as mentioned before.

The problem is that there is no like to like schemes in other EU countries and the taxation is too complex so they dont want to bother providing this service.
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Here is what I've found out - not much to add honestly.

1) Awareness is incredibly low - my fund admin and DC trustees were unaware.
2) There are options (many shared above) - forum member Marc was in touch directly and his firm has options for individuals.
3) Annuities seem to be no problem - I got a brainwave to see if I could get a shorter term annuity and therefore draw down the funds faster - these exist in the US, but alas no, seems annuities in Ireland don't have this flexibility - I can understand why as it defeats the purpose of income for life etc. and is a backdoor cashout of your pension.

My current plan is to stay in my DC scheme as long as possible in the hope things improve. Worst case I will be 'resident' in Ireland when the time comes to purchase the ARF and I'll handle the US tax myself (this isn't ideal I know).
 
BingCrosby said:
My current plan is to stay in my DC scheme as long as possible in the hope things improve. Worst case I will be 'resident' in Ireland when the time comes to purchase the ARF and I'll handle the US tax myself (this isn't ideal I know).
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That's my plan too at the moment. Unfortunately I was hoping to use ARF drawdowns to pay my PRSI from age 50, rather than paying the €500 VC1 contributions out of my own pocket but whatever. I've still got a couple of years for Revenue to clarify the matter.
 
My understanding is that for a while people were using the possibility of cashing their ARFs abroad and then going back to Ireland n avoiding any taxation.
To stop this, Ireland taxes your ARF at source As a resident in another EU country the country will tax you too and its up to you to prove the double taxation.
The difficult part is then that doing so you will need to show what has been the amount that corresponds to a gain from the principle Of the distribution on that year and you will need the ARF provider to clarify all that info for you.
So in principle it can be done but in practice its difficult n you may not get your refund Back.
I agree this should be changed as there are many EU workers (including Irish) that will retire abroad.
The good news for you is that Germany is one step ahead on this issue in the EU.
see the Report from PwC
 
Yeah the Irish-German DTA gives sole taxation rights of ARFs to Ireland and it appears from reading the article you linked to, so do all 3 DTAs that cover ARFs. I would then declare the income on my German tax return and Germany would not tax it but it would use it to increase my tax rate on my taxable income here. That's all spelled out in the DTA I believe. It's a while since I read it. It should really be straightforward. I hope that Revenue at least issues guidance to the ARF providers so that they can sell ARFs to people who do actually live in countries where the ARFs are covered in the DTA, which is the whole point of including them in the DTA.
 
murphaph1 said:
I hope that Revenue at least issues guidance to the ARF providers so that they can sell ARFs to people who do actually live in countries where the ARFs are covered in the DTA, which is the whole point of including them in the DTA.
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That still won't give them authorisation from BaFin to sell financial products to German residents, or to comply with local regulations.
 
Fortune said:
Still leaves them needing to comply with local regulations.
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On what?

I don’t think national law in the EU can prevent cross-border provision of financial services.

A provider may have its own reasons or risk appetite but this is a business decision not a regulatory obligation.
 
A related issue is PRBs/Butout bonds maybe a problem for people who intend to become non-residents.

My understanding is they cannot be moved to another country - except seemingly to the UK.
 
BaFin itself says that financial institutions in the rest of the EEA have the right to sell their financial products across the EEA either by setting up a subsidiary in whichever country their wish to operate or just selling directly across the border:
Europäischer Pass
In einem Staat des Europäischen Wirtschaftsraums (EWR) zugelassene Kreditinstitute, Wertpapierinstitute, Zahlungs- und E-Geld-Institute sowie bankenangehörige Leasing- und Factoringinstitute sind grundsätzlich berechtigt, ihr Geschäft auch in anderen EWR-Mitgliedstaaten auszuüben. Die grenzüberschreitende Tätigkeit kann entweder durch die Errichtung einer Zweigniederlassung („Niederlassungsfreiheit“) oder im Wege des freien Dienstleistungsverkehrs („Dienstleistungsfreiheit“) erbracht werden. Die Niederlassungsfreiheit und Dienstleistungsfreiheit werden hier unter der Bezeichnung „Europäischer Pass“ zusammengefasst.
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If they want to do this, they simply need to notify their home country's regulatory authority:
Beabsichtigt eines der oben genannten Institute im Rahmen der Niederlassungs- und/oder Dienstleistungsfreiheit in einem anderen EWR-Mitgliedstaat tätig zu werden, muss es dies der Heimat-Aufsichtsbehörde mitteilen („Notifikation“).
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So honestly I don't see why an Irish financial services provider can't offer services in Germany. Many already do, sure Ireland is home to vast numbers of funds, ETFs etc, invested in by Germans, all quite legally. I have Irish domiciled ETFs myself. If anyone doesn't speak German, just stick the text through google translate. I speak German but don't want to bias the translation.

www.bafin.de

Europäischer Pass

In einem Staat des Europäischen Wirtschaftsraums (EWR) zugelassene Kreditinstitute, Wertpapierinstitute, Zahlungs- und E-Geld-Institute sowie bankenangehörige Leasing- und Factoringinstitute sind grundsätzlich berechtigt, ihr Geschäft auch in anderen EWR-Mitgliedstaaten auszuüben. Die...
www.bafin.de www.bafin.de
 
I'm sure @S class helped me out with this before, but should I be forced into taking an annuity, will PRSI be deducted by the annuity provider at a class that brings pension entitlements? As a voluntary contributor it is my understanding that I will automatically cease being able to make voluntary contributions at the end of the year preceeding my 66th birthday (as the law stands currently). As my birthday is in late November that's a lot of missed weeks before I can start claiming the pension and I am slightly short of the 2080 as it is, so if an annuity paid PRSI in a "useful" class (to a non-resident) then I would make sure to take out that annuity early in the year of my 65th birthday, to be sure of no interruption to my PRSI contributions, assuming the ARF mess isn't sorted out by then.
 
murphaph1 said:
will PRSI be deducted by the annuity provider at a class that brings pension entitlements?
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I think PRSI is deducted by default and S Class has confirmed that in practice no matter how little PRSI is deducted you get the 52 Class S credits.


I’m not 100% sure that PRSI is deducted for a non-Irish resident though.
 
murphaph1 said:
will PRSI be deducted by the annuity provider at a class that brings pension entitlements? As a voluntary contributor it is my understanding that I will automatically cease being able to make voluntary contributions at the end of the year preceeding my 66th birthday
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Prsi on Annuities is class M. This is zero cost, but it is not Reckonable for the Contributory Pension.

The good news is that you can now be a voluntary contributor up to your 70th birthday. This is dependant on deferring your pension beyond age 66. Once you start to claim the Contributory Pension you are locked out of receiving any more reckonable Prsi contributions.

As far as I know the rule about Prsi contributions not applying in the calendar year of your 66th birthday (or the claim year if you defer your pension) only applies if your pension is calculated using the averaging method. If your pension is calculated using the total contributions method all contributions up to your claim date are counted.

If it turns out that your voluntary contributions are not counted in your pension claim year, you could defer to the 1st January after your 66th birthday and then all your birthday year would be counted.

When you eventually claim your pension,if you discover that the last years contributions have not been counted and you are short of 2080 you have a chance to cancel your claim and defer it for longer. In order for this to work you must not have drawndown any money from the pension. So either opt for payment at a post office and don't claim your money or if you opt for payment to your bank account act quickly to cancel before the payment is made to your account. There are a few weeks between getting the notification from DSP, telling you what level of pension has been awarded, and the first payment date.

So if it turned out that your 66th birthday claim was less than full pension you could then cancel and defer to the start of the next year.

Class S Prsi can now apply up age 70 on ARFs, if that is any use to you. (If your Contributory Pension is deferred beyond age 66)
 
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VInterested said:
My understanding is that for a while people were using the possibility of cashing their ARFs abroad and then going back to Ireland n avoiding any taxation.
To stop this, Ireland taxes your ARF at source As a resident in another EU country the country will tax you too and its up to you to prove the double taxation.
The difficult part is then that doing so you will need to show what has been the amount that corresponds to a gain from the principle Of the distribution on that year and you will need the ARF provider to clarify all that info for you.
So in principle it can be done but in practice its difficult n you may not get your refund Back.
I agree this should be changed as there are many EU workers (including Irish) that will retire abroad.
The good news for you is that Germany is one step ahead on this issue in the EU.
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From the perspective of ARF provider I understand that an ARF for a 'resident' is going to be much more straightforward (and less costly) - but why is it so difficult to break out principle gain and dividends? Every brokerage platform I've used does this and they supply end of year breakdowns of same. (I get that the ARF will have an annual distribution and this needs to be broken out so it's not the same as brokerages do for a standard fund) What's the big deal, isn't this just a bit of software that spits out something that meets the revenue guidelines? On the other hand, I know having 'US' residents as customers is a different situation and requires registering with the SEC etc. etc., I get why that might be a step too far for some providers. What am I missing ?
 
GSheehy said:
I think you'll find that different providers have different rules/interpretations on whether they'll mature their pension to an ARF for a non-resident.
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Zurich Life can set-up ARF/Annuity contracts for non-residents to facilitate the conclusion of an existing Zurich pension arrangement.

There is a long list of conditions (Cross Border / Compliance) that need to be met, including, getting individual approval, the client being aware of the potential tax implications, the transaction must be passive i.e. the client comes to the intermediary and intermediary doesn't actively look for the business, no advice is given etc.
 
BingCrosby said:
What am I missing ?
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My guess would be that the ARF QFMs are not going to bother spending IT system time on this. How many non-resident ARFs are out there? How many of those will go to a single company?

I suspect they'll allocate their IT resources to improvements that will help them to win more of the much larger Irish resident market.
 
LDFerguson said:
My guess would be that the ARF QFMs are not going to bother spending IT system time on this. How many non-resident ARFs are out there? How many of those will go to a single company?

I suspect they'll allocate their IT resources to improvements that will help them to win more of the much larger Irish resident market.
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fair point and it may remain a niche play - but its a big niche. ~20 of Irish population is born outside of Ireland some may want to retire elsewhere. Not to mention folks who want to retire in the sun. Lastly you have all the tech/pharma folks who pass through here for a few years and may get caught up in this. Its not my game, but feels like an opportunity to me.
 
BingCrosby said:
fair point and it may remain a niche play - but its a big niche. ~20 of Irish population is born outside of Ireland some may want to retire elsewhere. Not to mention folks who want to retire in the sun. Lastly you have all the tech/pharma folks who pass through here for a few years and may get caught up in this. Its not my game, but feels like an opportunity to me.
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"Niche" is a word I'm fond of. I could see it being worthwhile for a smaller ARF QFM to make the effort and in return corner this segment if they marketed it properly. Probably too small to get one of the big companies excited but, as you say, big enough to keep a smaller QFM firm happy.
 
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