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Overseas transfers from occupational pension schemes

The issue of what is referred to as ‘overseas transfers’ from Occupational Pension Schemes is topical at the moment. There are a number of reasons for this:

As a result, there are a large number of people contributing to company pension plans in Ireland, who intend residing in another jurisdiction at the time of their retirement.

There has also been talk of transfers being made in order to take advantage of more favourable tax regimes in other jurisdictions. Given the attractive tax reliefs available to company pension plans in Ireland, it is not surprising that there are restrictions and criteria to how transfers may take place.

The criteria and rules relating to this issue are drawn from legislation and from Revenue guidance.

The Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations, 2003 (overseas transfer regulations) provides that a transfer may be made to an overseas arrangement where the trustees or PRSA provider have satisfied themselves that:

  • The retirement benefits under the overseas arrangement are relevant benefits by obtaining written confirmation to that effect from the trustees, custodians, managers or administrators of the overseas arrangement. Relevant benefits is any kind of pension, lump sum, gratuity or other like benefit on or after retirement or death or in anticipation of retirement.
  • The overseas arrangement has been approved by an appropriate regulatory authority for the country concerned.

The Revenue Pensions Manual

The Revenue Pensions Manual refers to the Overseas Transfer Regulations and the obligation on trustees to comply with their terms. It refers to compliance with the requirements being met by obtaining written confirmation from the administrator of the overseas arrangement.

The Manual also places certain specific restrictions on transfers from Occupational Pension Schemes to arrangements within the EU and outside the EU.

Transfers within the EU

The overseas scheme must be operated or managed by an Institution for Occupational Retirement Provision (IORP) within the meaning of the EU Pensions Directive.

The IORP must be established in a member state of the European Communities which has implemented the Directive in its national law. The scheme administrator must also be resident in an EU Member State.

Transfers made outside the EU

The member must be employed in the country to which the transfer is being made.

Bona Fide Transfers

The Manual also states that ‘only bona fide transfers are acceptable’. The overseas arrangement is notified of the amount of the transfer which can be taken in lump sum form. An overseas transfer is a Benefit Crystallisation Event - if the fund exceeds certain amounts a tax charge may be due.

An ‘Overseas Transfer Declaration’ must be completed. This is signed by the transferring individual and includes details of the Irish and overseas arrangement. In essence the signing party is stating that they are not transferring their benefits for the purpose of circumventing Irish pension rules.

While not directly relevant to Occupational Pension Schemes, two other points are also worth making in relation to PRB and PRSAs.

Personal Retirement Bonds

Revenue has confirmed that Personal Retirement Bonds do not follow the rules which apply to general occupational pension schemes. PRBs are only permitted to transfer out if the jurisdiction to UK arrangements.

Personal Retirement Savings Account

Revenue has recently confirmed that overseas transfers of PRSAs will incur a tax charge. 

Click here for the application form Transfer to Pension Schemes Overseas

Finally it should be noted that the area of ‘overseas transfers’ generally is one which is being looked at currently and is subject to change. The information contained in this article should not be taken as a definitive statement of the law or guidance in relation to the issue of overseas transfers. Appropriate advice should be sought in relation to specific cases.