Why is there an annual limit on pension contributions?

[argolis]

Actually, no.

Historical records are scattered on different IT systems and if you go back long enough paper files.

It would be an administrative nightmare to try to allow people to access unused allowances from 1992 or whenever.

Oh Well, unless they embarked on some grand unifying digitisation project, I guess that's the end of that! Given most careers span 45 years, maybe this could be rolled out approaching 1992 + 45 years = 2037. If they have 1980s records on some antique IT system maybe they could bring that forward significantly but otherwise I guess it would have to depend on something more straightforward...

 

[NoRegretsCoyote]

If they have 1980s records on some antique IT system

This would be absurdly expensive to facilitate the one taxpayer in a thousand who would use it.

 

[SGWidow]

What about people who get tax relief at the 40% rate, build a €2m fund, expatriate it to Malta, and then draw it down tax free in a sunnier clime.

Hi Gordon,

As you say, this is bad for the Exchequer but potentially great for the individual.

Can you explain how it works please? Is it Halal? If I transfer my fund to Malta, do I need to live outside Ireland? If so, how is the income taxed in this new country? Oh, and why Malta specifically?

 

[Gordon Gekko]

Malta has decent tax treaties with other jurisdictions and has an established financial services infrastructure. Plus they speak English and use common law.

In order to draw it down tax-free or at lower rates of tax, one needs to be living in another country, Portugal for example, where the rate is 0-10%.

 

[SGWidow]

Thanks Gordon,

Your explanation is clear but that's mad stuff : tax relief on the way in, tax free growth and more or less tax free on the way out! Wow.

Are folk actually doing this stuff? Is there anything the Revenue can do? Is there anything the government could do?

 

[Conan]

Why not?

Because it will be manipulated and abused by the wealthy. Company owners can pay themselves and their spouse €5,000 a year each and fund for a pension of €2m each.



Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Far be it from me to disagree with SBarrett, but that’s not the case. To accumulate a fund of €2m and comply with Revenue rules, you would need to have earnings of c€90,000 pa . That would allow a fund sufficient to generate a pension of 2/3rds (so c€60,000), assuming you have a minimum of 20 years service by retirement age. A salary of €5,000 would not allow a Company Director build up a fund of €2m.

 

[Paul O Mahoney]

Malta has decent tax treaties with other jurisdictions and has an established financial services infrastructure. Plus they speak English and use common law.

In order to draw it down tax-free or at lower rates of tax, one needs to be living in another country, Portugal for example, where the rate is 0-10%.

My ears are flapping and I might be getting the wrong end of the stick, but are you saying that you can transfer the ARF or simply draw down from it if you are living/ tax resident in as you say in Portugal/Malta ?

 

[Gordon Gekko]

My ears are flapping and I might be getting the wrong end of the stick, but are you saying that you can transfer the ARF or simply draw down from it if you are living/ tax resident in as you say in Portugal/Malta ?

No, an ARF can’t be transferred out or drawn down tax free.

The trick is to move a pre-retirement pension fund out.

 

[Paul O Mahoney]

No, an ARF can’t be transferred out or drawn down tax free.

The trick is to a pre retirement pension fund out.

Ah here .....whats a pre retirement pension fund out? Is you encash early and leave with the readies, sorry to sound a bit thick but we are now trying to get to grips with the whole thing, and with income tax in 6 figures every year its beginning to chap our backsides

 

[Gordon Gekko]

Ah here .....whats a pre retirement pension fund out? Is you encash early and leave with the readies, sorry to sound a bit thick but we are now trying to get to grips with the whole thing, and with income tax in 6 figures every year its beginning to chap our backsides

An ARF is a post-retirement structure. It can’t be moved out of Ireland. But a pre-retirement structure like an occupational pension scheme can be moved out of Ireland.

 

[Paul O Mahoney]

An ARF is a post-retirement structure. It can’t be moved out of Ireland. But a pre-retirement structure like an occupational pension scheme can be moved out of Ireland.

Thank you.

 

[RMGC11]

So, if at age 38, your fund suddenly increases in value to €550k, you stop contributing until you hit 40.

@Brendan Burgess - in light of the recent SFT changes, what would be the new limits/thresholds per age that you would recommend to folks?

 

[Brendan Burgess]

Hi RMGC

I put forward a general idea that the thresholds should increase with age.
So if you spent your early years studying and so not earning and then saved up for a house, you would be able to "make up" for lost time by contributing more than you are allowed to do at present. I suggested the following limits but they were just really an indication of how it would work.

Now that the fund limit has been increased, these age limits would need to be adjusted accordingly. But I put no great thought into arriving at €200k.