People, who worked in the UK and built up a fund in a UK pension and are back living in Ireland, may now bring their pension home. Her Majesty’s Revenue and Customs (HMRC) introduced legislation in April 2006, allowing any UK pension to be transferred to another country once the receiving pension has been approved by HMRC. This is known as a Qualifying Recognised Overseas Pension Scheme (QROPS).
The advantages of moving are:
- You are no longer only restricted to a set income for life. Now, you can choose how and when you want to access your retirement fund.
- The taxation regime in the event of death compares favourably with the UK where death taxes can be up to 73%.
- Reduce the risk of potential currency issues in retirement by moving your pension into the currency of the State in which you are going to retire.
There are some taxation issues:
- Once you have not been resident in the UK for more than five years when the payment is made, then there is no immediate tax liability. However, QROPS must report payments within ten years of the original transfer date to HMRC regardless of the member’s residency status.
- If you’ve been a resident in the UK in the tax year when the payment is made or in any of the five preceding years, then any benefit arising from the buyout bond, will be reported to HMRC and you could be subject to UK unauthorised payment charges.
- If you haven’t been a tax resident in the UK in the last six tax years then there are no UK tax implications of transferring or withdrawing benefits from the buyout bond.
- HMRC introduced new QROPS reporting requirements in April 2012. Now all payments made within ten years of the inception of the Buyout Bond contract must be reported. This will not have any taxation implications for you once you satisfy the non‑residency requirement.
It is important to talk to your financial broker regarding your particular circumstances before making any decisions.