For Irish people who chose to retire abroad, they now have the option to avoid the Irish pension levy, avoid Irish income tax, capital gains tax and make tax savings upon death with regards to your existing pensions. You can now avoid the new Irish tax on pensions via a transfer to a QROPS (Qualifying Overseas Pension Scheme). This is also known as the European Union Retirement Benefits Scheme (EURBS).
The new Irish pension levy (which started at an initial rate of 0.6% per year on pension fund assets) was announced last May in 2011 and is backdated to 1 January 2011. The Irish pension levy is targeted to raise €450m for the Irish Revenue Commissioners, every year, for at least the 4-year period 2011-2014. The Irish tax on pension payments applies to individual pension policies (“retirement annuity contracts”), company pension schemes, personal retirement bonds, (non-vested) PRSAs and buy-out bonds.
The new pensions levy is basically a tax on savings and jobs. This is a tax on your average working man. We can help you transfer your pension pot offshore to avoid these new taxes. If you have a pension pot of 100,000 Euros or more, it may be beneficial to transfer into an EURBS or QROPS.
Irish Expats and Tax Avoidance on Pensions
For those who are resident in Ireland and have an Irish pension scheme or those who have pension schemes in Ireland and have left, there are significant advantages to transferring those schemes to a safe EU Jurisdiction such as Malta. Malta is a former British colony and member of the European Union. It has a Double Taxation Agreement (DTA) with Ireland which means that your pension can be transferred to Malta and paid out gross. It also has DTA’s with over 60 other countries around the world, which means you can improve tax efficiency for many countries you may retire in abroad.
Benefits of a QROPS Pension Transfer:
• Avoid the Irish pension levy
• Greater Investment choice
• Consolidation of pension schemes. Manage all your pensions under one umbrella
• Income tax savings
• Capital gains tax savings
• Tax savings upon death
• Entire pension pot is passed to loved ones upon death
• Currency options. Choose to keep in Euros or convert to GBP or USD
• Increased lump sum and income options available
The Irish Pension Levy
If you live in Ireland or have previously lived in Ireland and have an Irish pension scheme you can transfer it using a Malta QROPS (Qualifying Recognised Overseas Pension Scheme) which is recognised by HMRC in the UK and approved in Malta.
The pensions levy announced in May 2011 and retrospectively enforced from 1st January 2011, applies to individual pension policies, company pension schemes, personal retirement bonds, (non-vested) Personal Retirement Savings Accounts and buy-out bonds.
How much would the Irish levy be? How much would be the tax on Irish pensions?
The Irish government has unveiled plans to cut public spending by €2.1bn, and almost €1.4bn of this will be achieved by requiring public sector workers to pay a new pension ‘levy’ averaging 7.5% towards their Irish pensions.
The government said the new ‘pension-related deduction’ would apply to the total earnings of all public servants, though not those already receiving a pension, and would be “graduated so that the effect is somewhat less at lower income levels and greater at higher levels”.
The average deduction will be 7.5% of total earnings, although the contribution will be made up of 3% on the first €15,000 of pay, 6% on the next €5,000 and a 10% levy on the remainder of earnings.
A table showing the effect of the contributions means the lowest paid public sector workers, on €15,000 a year, would contribute 3%, or €450 a year, while those earning €25,000 would pay 5% or €1,250 per year on their Irish pensions.
Peter McLoone, general secretary at Impact (the largest public service union in Ireland), said the government’s decision would mean a public servant earning €770 a week before tax “would have to pay an extra €52 pension hike a week on top of their existing tax, pension contributions and the new 1% levy” – the income levy announced in the 2008 Budget.
Who qualifies for a QROPS or EURBS pension transfer?
A state pension cannot be transferred. But, most other types of pension, even final salary schemes can be transferred to a safe jurisdiction such as Malta which is within the EU and would avoid Irish taxes once you are offshore for 5 years or more.