As of January 2020, the United Kingdom (UK) had officially left the European Union (EU). With the provision of the withdrawal agreement came the transition period, which will run up until December 31st, 2020 allowing UK citizens and business to remain as part of the EU’s rules, regulations and trading arrangements.
This will give businesses on both sides time to adjust for upcoming changes. The transition period will end on the 1st of January 2020, changing the conditions of policy and trade outcomes and will highly depend on negotiations held between the UK and EU during the transition period.
Despite of the many uncertainties involving Brexit, UK Pensions seems to be a more stable matter. The governments of Ireland and Britain have guaranteed the continued payment of state pensions, child benefit and other social welfare payments in the event of the UK crashing out of the EU without a deal.
UK State Pensions
Ireland leads the number of UK pension Claimants. Source BBC – DWP Figures for August 2019
As demonstrated by the graph above, Ireland ranks 1st on European Countries pension claims. With the possibility of a no deal scenario, it is natural that many financial concerns arise with regards to UK pensions.
Essentially, this article will target the impact Brexit will have on UK pensioners living in Ireland. Would their Pensions enjoy the same entitlements? What is the right way to transfer UK’s pensions to Ireland?
If you live in the UK, your state pension is uprated every year in line with the triple lock, which means it rises by whichever is highest of average earnings, inflation or 2.5%.
As regards to uprating, Ireland and Britain Governments agreed that you will continue to get your UK State Pension uprated if you move to Ireland and you are a UK or Irish national, even after the Withdrawal Agreement deadline.
You will be able to claim and continue to receive UK benefits in Ireland if you are an UK or Irish national, as long as you continue to meet the qualifying conditions.
State Pension Eligibility
UK State Pension eligibility could also incur some material change. When the UK was part of the EU, the process of claiming retirement for people that worked in different European countries was simple and done by a single claim.
For instance, if someone had worked for 10 years in the UK, other than having worked in different EU countries, when they were eligible to retire, they could apply for their state pension in the last country where they lived or worked, and the single claim would then be coordinated by that country’s authorities.
You are currently also entitled use period work in other EU countries to count towards your 10 year minimum threshold to claim for a UK pension (it is worth noting that you would only be paid based on the contributions made when you were working in the UK).
The withdrawal agreement keeps that coordination going for those living in Europe until the end of 2020, however it will depend on negotiations on the future relationship between the EU and the UK.
UK Pension Transfer
How can I transfer my UK Pension to Ireland?
Most Irish residents under the age of 70 are also eligible to transfer their pensions, with a few restrictions.
If you have worked in the UK some time during your career you would have probably built up a Pension pot. If you are planning to move back to Ireland, or if you have already done so, you can move/transfer your UK Pension to Ireland by way of a Qualified Recognised Overseas Pension Scheme (QROPS) Buy Out Bond. This would give you more control over your investment options, both now and when you retire.
That is the ideal option in most cases, as it is more convenient to have your pension in your country and in your exchange rate. In addition, having your pension abroad can increase bureaucracy in future operations such as Inheritance Planning.
*If the scheme to which you are considering transferring your pension savings is not a QROPS, your UK pension scheme may refuse to make the transfer, or you may have to pay at least 40% tax on the transfer.
A Qualifying Recognized Overseas Pension Scheme (QROPS) is a pension scheme that is allowed to receive a transfer of UK pension benefits free of tax.
QROPS offers a retirement opportunity whether you are an Irish national that had paid into a pension in the UK and is now planning to transfer your pension to Ireland, or a UK national concerned about the effects of Brexit on your pension and want to safeguard your personal retirement savings against the increasingly restrictive UK pensions regime.
A QROPS offers flexibility and significant taxation and investment advantages, allowing UK pension holders to still be able to invest in them.
What are the benefits?
- Control – Greater control over your pension investment.
- Tax – A QROPS can accept pension transfers from the UK without potentially triggering a tax charge.
- Convenience – It is easier if you are planning to retire back home in Ireland. If you leave your pension benefits in the UK, you will have to submit an annual tax return in Ireland in retirement declaring your income from the UK. Transferring your pension to Ireland would also allow you to work with a Financial Advisor familiar with the Irish market.
- Inheritance Planning – If the beneficiaries of your Will or your dependents are not living in the UK, leaving your pension there may be more complicated to deal with in the event of your death, making more sense to transfer your pension to Ireland.
- Standard Fund Threshold – Any pension savings you transfer to a QROPS in Ireland does not count towards the €2 million Standard Fund Threshold (which is the maximum pension amount you can save for in Ireland without heavy tax charges). The SFT only takes into consideration pension savings in relation to Irish earnings.
How does QROPS affect my Tax Free Lump Sum?
- The tax free lump sum you claim from your QROPS forms part of your lifetime limit in Ireland.
- It will be included in your €200,000 tax free lump sum limit (and optional €300,000 taxable lump sum taxed at the standard rate of tax).
- If your total pension fund at retirement exceeds €800,000 (between your UK & Irish pensions), the excess in the lump sum over €200,000 would be taxed in Ireland at 20%, where it could be tax free in the UK.
Considerations before transferring your UK Pension to Ireland
Tax charges on Transfer:
First off, make sure to transfer your pension to a scheme that’s been registered with HMRC as a QROPS. Otherwise, it could result in UK tax charges of up to 55% of the amount transferred.
The minimum retirement age on a QROPS is 55. You can only access your benefits before age 55 on the grounds of ill health.
If you have been a resident in the UK anytime within the last 5/10 UK tax years, you may be liable to UK tax on your QROPS at retirement.
Accessing your Pension:
For all transfers received into a QROPS, benefits can be paid if you;
- Are age 55 and over and,
- Have not been a UK tax resident for at least 10 UK tax years.
Overseas Transfer Charge:
There is a 25% overseas transfer charge on a QROPS unless the transfer is:
There are limits in both the UK and Ireland as to how much you can save into a pension, outside of which you maybe liable to tax. In the UK this is referred to as the Lifetime Allowance. In Ireland, it is referred to as the Standard Fund Threshold.
It would be worth assessing the value of your pension with the Lifetime Allowance in mind.
Options at Retirement:
You can check with your UK provider on what type of pension you have and how you can access your money at retirement from that scheme.
It is safe to say that despite the few uncertainties regarding your UK Pension, there are already some options in place for Irish residents to avoid losing their well-earned benefits and, while it is a more complex process, we can help take the burden off your shoulders.
The Transfer Process
Our Financial Advisors can facilitate QROPS transfers to bring your UK pension benefits back to Ireland (with an Irish registered life company) and into your own name.
- Talk with our Financial Advisors to discuss your options and to make sure it is the right decision for you. We will will complete the relevant paperwork with you for the QROPS Buy Out Bond, and ensure there will not be any UK tax implications.
- Request the transfer options form from your UK provider that includes the option to transfer overseas.
- These transfer options need to be signed and processed by the trustees of the UK scheme.
- The agreed upon Irish Pension provider will receive the transfer from the UK, convert it to Euro for you, and ensure your QROPS Buy Out Bond is set up. The Pension will now be in your name and in your control.
I want to transfer my UK pension to Ireland
What’s the next step?
Fill out your details and enquiry below, and one of our Qualified Financial Advisors will get back to you shortly.