Your guide to UK pension transfers

Transcription

1 Your guide to UK pension transfers

2 What you need to know You have a UK pension and you re thinking of bringing it home and you want to know your options. Am I allowed to bring it home? Maybe. It depends on the source. Most private sector schemes allow a transfer overseas, but, since 6 April 2015, most public sector schemes can t because they are not funded. To see if you can transfer your pension, simply contact your UK provider. What would I bring it home to? Assuming you can bring your UK pension home, you need to invest in a Qualifying Recognised Overseas Pension Scheme (QROPS). QROPS is a pension product which has been registered with Her Majesty s Revenue & Customs (HMRC) and can accept pension transfers from the UK without the potential for triggering a UK tax charge. Our Synergy Buy Out Bond satisfies all the QROPS rules and it s registered with HMRC (QROPS ). Before bringing my pension home, what should I consider? A lot of the differences between Ireland and the UK have been harmonised recently under the UK s new pension flexibility rules, but there continues to be areas where one jurisdiction may be more beneficial to you than the other. Most people will opt to transfer purely for convenience, administrative ease and the certainty offered by a local provider whose investments are denominated in Euro. 02 Your guide to UK pension transfers

3 But there are a number of key points you should consider, for example: What kind of UK pension is it and does it benefit from the new UK pension flexibility? Your options in the UK depend on the type of scheme that you are in - Defined Benefit schemes don t benefit from the new flexible retirement rules, but Defined Contribution schemes do where the provider has changed the scheme rules to allow it. You should check with your UK provider whether flexibility is available. If not, then an Irish pension be more suitable. What are the inheritance implications if I keep my pension in the UK? A paid up Defined Benefit scheme will only provide a pension for a dependant - there is no lump sum death benefit entitlement. Defined Contribution schemes can offer both a lump sum option on death and an inherited pension pot that the beneficiary can draw on. It s important to note though that to be offered both options, a beneficiary needs to be nominated by you. If a beneficiary isn t nominated and isn t a dependant, they can only be offered the lump sum option. Your pension also won t be liable to UK Inheritance Tax. What is my pension pot when comparing the UK Lifetime Allowance with the Irish Standard Fund Threshold? If you transfer your pension to Ireland using a QROPS, your transfer is tested against the UK Lifetime Allowance. If your fund is higher than this, you may have an immediate exposure to UK tax. Any tax due would be deducted before the transfer is made. The current Standard Fund Threshold in Ireland is 2m. Any transfer you bring home eats into this figure, for example, if you brought home a fund of 100,000, then your remaining fund threshold in Ireland would reduce to 1.9m. A comparison of a number of points is included in the table on the next page. It compares the typical main differences between Defined Contribution pensions only. Your guide to UK pension transfers 03

4 Defined Benefit pensions are more restrictive than Defined Contribution pensions. Some of the Defined Contribution benefits here may not be available on your UK pension, so check with your UK provider. Ireland 100% of policy value 25%* via Approved Retirement Fund (imputed distribution) Income Tax or CAT (depends on beneficiary of Approved (Minimum) Retirement Fund) 2m** Death (before retirement) Currency Tax free Retirement lump sum (subject to limits) Taxable lump sum (subject to limits) Drawdown Forced withdrawals in retirement Approved Minimum Retirement Fund Death in retirement Standard Fund Threshold/ Lifetime Allowance (before chargeable excess tax) UK 100% of policy value 25% No No Below age 75: All benefits from DC pensions paid tax free (within Lifetime Allowance) Age 75 and over: All benefits (pension & lump sum) taxed at recipient s marginal rate of tax 1.25m currently*** From 6th April m * If you bring your UK pension home then your ability to fund the lump sum in Ireland is diminished. The maximum tax free lump sum from all pensions is 200,000 and therefore the optimum fund is 800,000. If your UK fund brings you over this maximum then the part of the lump sum in excess will be taxed in Ireland, whereas it could be tax free in the UK ** If you bring your UK pension home, it will count as part of your Irish pension funds for the Irish Standard Fund Threshold of 2m (or your Personal Fund Threshold if granted). *** You may have transitional protection giving you a higher personal lifetime allowance. Your UK adviser will be able to confirm if this applies to you. Your guide to UK pension transfers 04

5 When I want to take my benefits, what should I consider? A UK pension should only transfer to an overseas scheme that has been registered with HMRC as a QROPS. Transfers to any other kind of scheme can result in penal tax charges of up to 70% on the amount transferred. In certain circumstances, the QROPS provider is required to notify HMRC of payments made from the QROPS. For example, payments made as a result of: Retirement Transfer to another pension policy Death It is also important to be aware of circumstances which might affect you when you are considering taking your benefits from your QROPS: Residency Pension age Reporting to HMRC If you have been resident in the UK in the current UK tax year or any of the previous 5 UK tax years (6 April - 5 April), you may be liable to UK tax on your payment. When you are making a claim on your policy, you will have to sign a declaration confirming how long you have been out of the UK. If your period of non-residence potentially exposes you to a UK tax charge we will make you aware of this before processing your request. Minimum retirement age is 55. You cannot take benefits before age 55 except on the grounds of ill-health. This complies with the HMRC Pension Age test which was introduced in April If a payment is made within 10 years of the start date of your QROPS, the QROPS provider must report the transaction to HMRC within 90 days. There are no UK tax consequences associated with this obligation unless you fail the residency test. Your guide to UK pension transfers 05

6 So, if I decide that I want to transfer, what do I need to do? Step 1: Discuss the transfer with your financial adviser. They will give you a Synergy Buy Out Bond application (SYBOB30) to complete. Step 2: Request a transfer options form from your UK provider that includes the option to transfer overseas. You ll also need the Qualifying Recognised Overseas Pension Schemes Member information form (APSS263) which can be found on the HMRC website. Once you ve completed these, send them to your financial adviser with the Synergy Buy Out Bond application (SYBOB30). Step 3: Your financial adviser submits the forms to us. Step 4: Once we receive the transfer amount from your UK provider, we ll convert it to Euro and set up your QROPS Synergy Buy Out Bond. Warning: If you invest in this product you may lose some or all of the money you invest. Warning: If you invest in this product you will not have any access to this money until you retire. Warning: The value of your investment may go down as well as up. Remember Transferring a pension from the UK to Ireland is not suitable for everyone. We recommend that you get financial advice Laws and tax rules may change in the future. The ARF option might not be available to you at retirement. Your personal circumstances also have an impact on tax treatment. The information here is based on our understanding of the situation in October You should not base your decision solely on the information in this guide. 06 Your guide to UK pension transfers

7 I m coming home after 12 years of working in London and I want to be safe in the knowledge that my UK pension is administered in Ireland. Your guide to UK pension transfers 07

8 Pensions Savings Investments Find out more Talk to your financial adviser about how to plan for your future, they ll give you the information you need to get you started. Also, you can call us or visit our website (01) Mon-Fri, 9am to 5pm. Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary. Standard Life Assurance Limited is authorised by the Prudential Regulation Authority in the UK and is regulated by the Central Bank of Ireland for conduct of business rules. Standard Life Assurance Limited is registered in Dublin, Ireland (905495) at 90 St Stephen s Green, Dublin 2 and Edinburgh, Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. SYUKPT1 V Standard Life