U.K. pension transfers

Marc

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Just to update you, DWP (department of work & pensions) are about to change the rules on pension transfers from the U.K.

They are removing the statutory right to transfer on 30th November this year.


https://www.thepensionsregulator.gov.uk/en/pension-scams/dealing-with-transfer-requests#overseas

https://www.thepensionsregulator.go...y-guidance/db-to-dc-transfers-and-conversions

After this it is just going to be more difficult.

This on top of the Revenue change a few years ago which made transfers to anything other than a PRSA a train wreck waiting to happen due to the HMRC tax charge of 55% if you tried to retire benefits to an ARF within 5 years.

Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie
 

Baby boomer

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.......
This on top of the Revenue change a few years ago which made transfers to anything other than a PRSA a train wreck waiting to happen due to the HMRC tax charge of 55% if you tried to retire benefits to an ARF within 5 years.

Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie
This seems a bit cryptic. Can you clarify what this paragraph refers to? Is it a UK pension being transferred to an Irish ARF? Are you referring to the UK tax of 55% on funds in excess of the lifetime limit of £1millon or thereabouts? Presumably that only applies to those who are UK tax resident?

Or am I missing something here?
 

Marc

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The overseas transfer charge
As explained at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm102200 the charge can apply both at the time of a transfer
From a registered pension scheme to a QROPS that was requested after 9 March 2017. However, if any one of 5 conditions is met by the individual member requesting the transfer the charge does not apply. The exclusions are set out at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm102300#five-exclusions.
The charge also applies on an onwards transfer from a QROPS that is related to the original transfer and which occurs within the “relevant period”.


Please see the example under the sub-heading “The relevant period” at PTM102200. However, the tax charge does not apply to an onwards transfer from a QROPS where one of the 5 exclusions mentioned earlier or one of the additional exclusions is in point. This is set out at PTM102300. So provided you remain resident in the Republic of Ireland at the time of the proposed onward transfer and that transfer is to another QROPS in the Republic of Ireland then there will be no overseas transfer charge.

The unauthorised payments tax charges
If an onwards transfer from a QROPS is not a recognised transfer then the transferred funds will be subject to the unauthorised payment member charges. Guidance on when the unauthorised payment member charges apply in respect of funds transferred from a registered pension scheme to a QROPS is set out at
(an overview) https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm113100
(detail) various pages of in contents page at https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm113200
The unauthorised payment tax charges apply to a member of a QROPS in respect of funds transferred from a registered pension scheme in much the same way as they do to a member of a registered pension scheme. A transfer from a registered pension scheme is only unauthorised where the transfer is made to another registered pension scheme to a QROPS. Any other transfer by a registered pension scheme is an unauthorised member payment and subject to the member payment tax charges. The intent behind the aim member payment charges applying to funds held in a QROPS that have benefitted from UK tax relief in some way is to prevent avoidance of those charges by an individual who is a member of a registered pension scheme simply by transferring their pension funds to a QROPS.

When your funds are transferred from your registered pension scheme to an Irish QROPS charges are subject to the member payment charges as set out at PTM113210. That page also sets out the circumstances when the member payment charges cease to apply. Apart from the 5 and 10 year residence rule, there is a further condition that has to be satisfied in respect of ring-fenced transfer funds.

The key date is the date of the transfer into the Irish QROPS. PTM113230 explains all this.


If your ring-fenced transfer fund has a key date later than 6 April 2017, the unauthorised member payment charges will apply if a QROPS makes a payment that is an unauthorised payment even though the non-residence condition is satisfied.
Therefore potentially a transfer made from an Irish QROPS within 5 years of the date it is received from your registered pension scheme (in the U.K.) and which would not be a recognised transfer (an authorised payment) if it were made from a registered pension scheme will be an unauthorised payment and taxed accordingly.

So unless the proposed transfer is to another Irish QROPS the transfer will be an unauthorised payment. Of course the overseas transfer charge would not also apply.

So transferring your QROPs funds in full or in part to an ARF within 5 years of the date the QROPS received that transfer will result in unauthorised payments.
 

Steven Barrett

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This on top of the Revenue change a few years ago which made transfers to anything other than a PRSA a train wreck waiting to happen due to the HMRC tax charge of 55% if you tried to retire benefits to an ARF within 5 years.
There is differing opinions on this Marc. Some providers share your view, others don't.

I have clients who have invested in ARFs within 5 years of taking a QROPS transfer and there has been no issues with HMRC.


Steven
www.bluewaterfp.ie
 

Marc

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My bad I should have put “source” on there

That is verbatim from HMRC that’s actually “their” view so I’d say technically your client owes tax
 

Steven Barrett

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The life companies I used in these instances would have reported everything to the HMRC. These ARF's are in place a number of years and no one has come back looking for any tax payments. I am happy to trust that the technical depts of these life companies know what they are doing. If they tell me otherwise, clients will be advised otherwise.
 

elacsaplau

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893
Hi Steven

Who is liable for any retrospective losses to clients if HMRC do come looking?

Surely, if the client is going to be on the hook, he must be told?

Are you not responsible for the advice you provide? This reminds me of the thread from a few weeks ago aboit PRSA-AVCs where it seems that the legislation (Irish) clearly says one thing but industry practice is doing something else meaning that at some stage things could go very wrong!
 

Steven Barrett

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Hi Steven

Who is liable for any retrospective losses to clients if HMRC do come looking?

Surely, if the client is going to be on the hook, he must be told?

Are you not responsible for the advice you provide? This reminds me of the thread from a few weeks ago aboit PRSA-AVCs where it seems that the legislation (Irish) clearly says one thing but industry practice is doing something else meaning that at some stage things could go very wrong!
Life companies have technical departments who's job it is to keep up to date with all of this legislation and rules. I have asked them if the can transfer in a UK pension and mature it immediately and transfer it to an ARF. They said yes. They wouldn't have done it if it was not allowed. They are also responsible for the reporting to the HMRC.

They are experts in this area and if they tell me they can do it, I trust them that they can.
 

elacsaplau

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So who makes good the client if something goes wrong?

Are the techies better informed than Marc who is giving the opposite advice?
 

Marc

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In a principle and agent arrangement such as a broker and life company I'm fairly certain that it is the agent, the broker, that is providing the advice.

Also, having worked in technical services I also know that the "advice" is always given by the agent and never by the technical dept. For example, Life Companies don't stand over their own trust deeds and require advisers and their clients to seek independent legal advice.
Likewise, just because a life co facilitates a transaction doesn't mean that they are on the hook for it
As for footing the bill, that is why we are required by the Central Bank to hold Professional Indemnity Insurance
 

elacsaplau

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893
I think Marc's approach is much more reasonable.

Also, I don't like the the approach "if the insurance company says it's all right, then I'm happy that it's all right" especially when it is known that there is a potential issue.

I'd be much more comforted with someone saying....."this is why the insurance company is saying and this is why I believe that this is the correct interpretation".

I refer again to the PRSA-AVC example where it seems that the technical departments of insurance companies are relaxed about following what the legislation says!
 
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