Is now the right time to move your pension from the UK?
If you’ve previously worked in the UK, you might have accrued retirement savings that are sitting in a pension pot.
There is a good deal of discussion about whether now is the time, in light of Brexit, to transfer pensions back to Ireland and the simple answer is that it entirely depends on your own situation.
If you are considering transferring your pension the first step is to ask your British pension provider whether they will allow you to transfer your pension to Ireland.
Most private sector pension funds will allow a transfer however most public sector pensions will not. If you are permitted to transfer your pension you will need to obtain an overseas transfer value which will be provided in British pounds, and then place your funds into a Qualifying Recognised Overseas Pension Scheme (QROPS) which accepts retirement savings without a British tax charge. Any lump sums of more than £30,000 will automatically require you to seek advice from a financial advisor regulated by the British financial regulator, the Financial Conduct Authority.
While it is certainly easier to manage a pension when it is held closer to home, there are a number of pros and cons to consider. For example:
– You may be able to take advantage of a higher tax-free lump sum, with the maximum tax-free lump sum for all pensions in Ireland being €200,000 per person.
– If your potential tax-free lump sum exceeds €200,000, the excess will be subject to tax in Ireland, whereas you could receive it tax free in the UK.
– In some cases when you transfer your pension to Ireland you might be able to access your pension earlier than the normal retirement age in the UK (but no earlier than age 55).
– If the transfer value of your pension is higher than the the British lifetime allowance of £1m then you may expose your lump sum to British tax, which would be deducted when the transfer takes place.
– If you retain your UK pension, a defined benefit scheme won’t provide a death benefit entitlement, only a payment for a dependent in the event of premature death. However if you transfer your pension to Ireland, the transfer value, or the pension value at your death is then payable to your estate, meaning your money won’t be liable to British inheritance tax.
It is important to keep in mind that if you have been living in the UK for up to ten years prior to the current tax year, the pension funds you transfer to Ireland might be liable for UK tax. Also, if you decide to exit the Qualifying Recognised Overseas Pension Scheme within five years of transferring your pension, UK tax rules will apply to your lump sum.
Navigating pension transfers from the UK to Ireland can be tricky so let our qualified financial advisors help guide you.
Give us a call today on 091 670 123 and let us help you make the right decision about your UK pension.