Ronan’s Monthly Review
Your UK PENSION- should I, would I, could I. QROPS could be your answer
A number of clients have recently been in contact and have asked if we could assess their options with regards to a pension they had while in employment in the UK. The quick answer is Yes, but a number of issues need to be examined prior to making any decision. Perhaps the most pressing issue in their minds is what effect “Brexit” will have on both individuals with UK benefits that are receiving retirement benefits presently and those who will be doing so in the future. The answer to most Brexit questions is “we don’t really know” but in terms of losing a benefit there should be no fears.Issues such as, how the benefits can be paid by a non-EU member to an EU member state could arise and the U.K. government have intimated that this could be the case. Individuals may be obliged to take out a UK bank account? Will residency then be an issue. Could the UK impose different anti money laundering requirements? Who knows.
However, we do recommend that you look at your options if you do have a pension benefit from employment in the UK and you should benefit from a payment in the future. These are the options available to you.
UK pension funds can only be transferred to a pension company in Ireland though a mechanism called QROPS. This is an agreed arrangement between HMRC and the Irish Revenue authorities. The structure means that the pension company in Ireland must be QROPS approved and adhere to these rules. These centre around when the claim can be made, exiting prior to 55, residency in Ireland over 10 years and indeed the nature of the U.K. scheme being Defined Benefit or Defined Contribution. If you are over 55 these funds become more accessible within this system and can be very attractive to any individual needing access to funds. You should of course assess your needs and requirements when making such a decision.
Let’s look at a case study. John is 56, is back leaving in Ireland for the past 15 years and has received a annual pension statement from a previous UK employment, showing a current fund of £80,000. The fund has been invested in a defined contribution scheme or personal pension. What are his options:
1. Transfer the fund via the QROPS system into a Personal retirement bond here in Ireland
2. Claim his tax-free sum (25%) of the fund immediately- €20,000 and invest the remaining fund in approved retirement funds. Of course, he could leave the fund in the bond until retirement
3. Leave the fund in the UK? Brexit? AML situation etc
4. Remember the currency difference. Sterling has been drifting over the last number of months. John £80,000 sterling would have been transferred to euro at better rates months ago. Some clients feel transferring sooner rather than later, due to Brexit.
5. Ownership of the bond is now with you, not a scheme or trusteeship
Note that if your fund in the UK is in a defined benefit scheme issues such as the “critical yield “ and independent IFA advise in the UK need to be taken. Transferring from this type of scheme needs considerable more examination than that of funds in defined contribution contracts.
In summary, you could say it’s now or never, but if you are one of the many Irish people with such a benefit in the UK, talk to us. Call me on 087-2765147
Next time let’s look at the Markets Bull performance and Bear trepidation