Moving Pension to Malta

Nermal said:
Open to correction, but it's my understanding Malta won't charge tax on payments out of their equivalent of an ARF if you're resident in a country outside Malta with which Malta has a DTA. There are many such countries and some of them have very attractive tax rates.
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I think that's why some other threads posited scenarios like this...
  1. Individual resident/domiciled in Ireland
  2. Moves their pension to Malta
  3. Retires to live in Portugal
  4. Reaps the benefits of more advantageous tax treatment of pension lump sum and/or ongoing drawdowns than would've been the case if they had remained living in Ireland in retirement
 
Having investigated the option of moving a couple of Irish DC pension pots to Malta here's my take on the pros and cons.

Pros:
- 30% may be taken as an initial lump sub opposed to 25% in Ireland. Taxation of this sum will occur in the country in which you are tax resident at the time the withdrawal is made, therefore useful for retirees who are tax resident in a country which does not tax pension lump sums, or has a high threshold. In Ireland up to €200k is tax free, with 20% tax on the next €300k, following which, normal tax rates and USC apply
- A retiree may wish not to draw down from their pension for some time which allows it to be invested in higher return investments such as an equities tracker fund paying an average of 10%, rather than a lower risk fund which returns 4%. €1 million invested at 10% grows to nearly €2,6 million in 10-years, at 4% its less than €1.5m. A difference of €1.1m. This is particularly relevant should the retiree live in a country where the pension lump sum is not taxed, and there is no CGT. €500,000 lump sum + €500,000 from sale of shares = €100,000 per year tax free income for 10-years, before accessing the pension income. At that point, look for the best tax arrangement offered. In Ireland you are forced to draw 4% (5% from age 70) on which you are taxed at up to 48%, whether you need it, or not.
- Should the retiree remain in Ireland, their Irish state pension is under the tax threshold, meaning zero tax, unless their lump sum exceeds the limit, or investments are sold, and 33% CGT applies.
- There is greater flexibility as to how the estate of the retiree can be distributed and taxation of same. I have not fully worked this out, however, I understand that the situation is not worse than the funds being in Ireland.
- Not having all your retirement eggs in one Irish basket. In your lifetime, how likely is a Sinn Fein / hard left government with a limitless desire for tax to pay for an united Ireland? Even the current government is addicted to ever-increasing expenditure on social welfare and on super-expensive renewable energy ambitions.

Cons:
A genuine reason for the transfer, which is not just tax avoidance, must be proven.
Costs on transfer. A financial advisor must be used.
Having to trust a foreign country and financial institution
Possibly not worth the bother unless the pension invested in Malta is at least €1m

Footnote:
Please feel free to comment or find fault. I am here to learn.
 
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I moved 1 Irish based DC fund to Malta and will do the same with another in the next few years (I live in a country that has a DTA with Malta).

My main motivation was that the DC scheme was winding down and my only option was to transfer it to a PRSA which would have "land locked" this fund to Ireland (and hence face having an ARF or annuity on retirement).

Another motivation is the Irish CAT tax my partner would face on inheriting this sum.
 
I didn't think that it was possible without first transferring the PRSA to a Master Trust or other pension vehicle that can then be transferred to Malta?
 
I'd forgotten about that old ruse of being "employed" by advisor for just long enough to have a contribution to their scheme in order to allow a transfer
 
Is it definelty the only way to transfer a PRSA to Malta is via a Master Trust ?

Which means the Master Trust trustees must test the transfer against Revenue's Actuarial Funding Standard.
Unlike a PRSA, an occupational Master Trust strictly limits the maximum size of your pension fund based on your Final Remuneration and years of service. Broadly, your maximum allowed fund is the capital required to provide a pension of two-thirds of your final salary.

Also a master trust can only be set up by a company that you are an employee or company director of, so essentialy would discriminate against self-employed sole traders, contractors, and retail investors with PRSA's that want to move ?
 
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