For individuals moving from the UK to Ireland or planning retirement in Ireland, transferring a UK pension using a Qualifying Recognised Overseas Pension Scheme (QROPS) can be a beneficial financial strategy.
This guide outlines the key details, benefits, and considerations when transferring a UK pension to Ireland via QROPS.
What is a QROPS Pension?
A QROPS is an overseas pension scheme that meets specific HMRC requirements, allowing UK pension holders to transfer their retirement funds abroad without incurring an unauthorised payment charge. For those relocating to Ireland, a QROPS can simplify pension management and offer various tax benefits.
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Benefits of Moving Your Pension to Ireland
1. Currency Alignment
If you plan to retire in Ireland and spend in euros (€), moving your pension can help you avoid currency exchange risks.
2. Tax Efficiency
Irish pension rules may offer tax advantages, such as taking a tax-free lump sum of up to €200,000. Additionally, Ireland’s pension system can sometimes provide greater flexibility for accessing retirement funds.
3. Simplified Management
Consolidating your pension in Ireland can reduce the complexity of managing multiple accounts across countries.
- Managing tax across two countries can be complicated.
- Some UK pension providers are unable to offer the same advisory support to customers outside the UK, which can make pension management harder as you age.
4. Greater Investment Choice
Irish PRSAs, personal pensions, and Approved Retirement Funds often provide a broader range of investment options tailored for Irish residents. This is because all Irish providers can deal with an Irish resident, but this isn’t always the case with UK providers, under FCA rules.
5. Estate Planning Advantages
- Before Retirement: Spouses or civil partners may receive 100% of the fund.
- After Retirement: Approved Retirement Funds ensure your spouse, partner or family receives 100% of the remaining fund.
- Annuities: You can choose to have your spouse or partner inherit 50% to 100% of your annuity at the start of the policy. You can also choose to have payments continue to your estate for up to 5 years, if you die in the first 5 years of your policy.
6. Lower Exchange Rate Costs
By moving your pension to Ireland, you avoid exchange rate fees when withdrawing funds in euros.
Drawbacks of Moving Your Pension to Ireland
Important Factors to Consider
- Where do you plan to retire? Aligning your pension with your long-term residence reduces currency and tax complications.
- What is the size of your pension? Larger pensions may require strategic tax planning.
- Do you prefer flexibility or security? Irish PRSAs offer flexibility, while UK pensions provide more structured security.
- Tax Relief Considerations: Both systems provide tax relief, but it’s crucial to understand how to claim benefits in your chosen country.
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Steps for Transferring Your Pension to Ireland
- Tax-Free Lump Sum: Up to 25% of your total pension (up to €200,000).
- Approved Retirement Fund (ARF): Your money is reinvested, and you withdraw funds periodically.
- Annuity: Provides a guaranteed income for life.
What is a QROPS pension?
QROPS is an overseas pension scheme that meets specific HMRC requirements, allowing UK pension holders to transfer their retirement funds abroad without incurring an unauthorised payment charge.
You can only transfer private pensions from the UK to pensions schemes in Ireland that are QROPS approved by HMRC.
Do I have to move my pension from the UK to Ireland?
No you don’t have to move your pension from the UK to Ireland. However you need to make sure you are aware of how this will impact you.
What is the best option for a QROPS pension?
There is no simple answer to this. A financial advisor will need to examine the scheme you are in, the QROPS options available to you and calculate the best solution.
We’ll work with you to ensure you understand all of your options and your potential retirement income, so that you can choose the retirement pension that suits your lifestyle & goals.
