As we know, the new Irish pensions levy (starting initially at 0.6% pa on pension fund assets ( http://www.finance.gov.ie/viewdoc.asp?DocID=6830 ) announced in May 2011, and retrospective to 1 January 2011, is targeted to raise €450m for the Irish Revenue Commissioners, every year, for at least the 4-year period 2011-2014. The levy applies to individual pension policies (“retirement annuity contracts”), company pension schemes, personal retirement bonds, (non-vested) PRSAs and buy-out bonds. Only in the last few days they the (Irish) Pensions Board estimated “70% of Irish pension funds are underfunded, and in many cases the deficit is substantial.”
All is not lost however as Irish residents with larger pension funds should be aware of The Occupational Pensions Schemes and PRSA (Overseas Transfer Payments) Regulations, 2003 (SI 716/2003) which permit a transfer value to be paid to an overseas pension arrangement, subject to certain conditions. Overseas pension schemes are not subject to the levy. The conditions for transfer to an overseas arrangement are:
This leaves a huge opportunity for external (in relation to Ireland) pension providers. Brooklands have seen an huge upsurge in Irish pension transfer business in 2011 for Irish Nationals now looking to transfer their monies elsewhere due to the political and financial situation as noted above. The normal route we have found for advisors is that they use or UK SIPP as an easier strategy to exit or alternatively they use the SIPP as a ‘stepping stone’ onward to a QROPS – normally a New Zealand where they can extract a greater tax-free sum than ordinarily available. Why it is perceived to be ‘easier’ for clients to go to a SIPP is that the Irish financial authorities have historically strong relationships with their UK counterparts and there are many similarities in the financial regulations, products and institutions. UK is also part of the EU which the main QROPS jurisdictions are not. That fact alone makes the Due Diligence requirements greater as they are not as familiar with the country in question which makes their Compliance departments 'twitch’. For clients to enjoy that benefits of a QROPS they must have been outwith the UK for 5 consecutive tax years (6th April-5th April). This is not a consideration for an Irish National with an Irish Pension as they have never been ‘in’ the UK.
Moving onto Europe, these same principles apply to Netherlands or other mainland EU countries however the Lisbon Treaty has explored the possibility of true ‘freedom of movement for pensioners’ akin to those of workers’ rights already in situ. The latest position can be summarised as…..not quite there, it’s coming but –not yet!
The UK position can be found at -
http://www.fsa.gov.uk/pages/About/What/International/pdf/PPD.pdf
The European Union have been looking (for many years!) into ways of enhancing worker mobility by improving the acquisition and preservation of supplementary pension rights. It is not European law as such, it is an agreement within the European Union as a product of the Lisbon treaty.
The Pensions Portability Directive seems to be bogged down in the Council, with Germany causing particular difficulties. Another EU Directive, 2003/41/EC, on the activities and supervision of Institutions for Occupational Retirement Provision, known colloquially as IORP, which attempts to create a Europe-wide market for pensions provision, is a framework directive, and fairly toothless at that - it has been left to individual countries to implement regulations under the Directive, and they have not done much.
For the time being, therefore, hopes for a Europe-wide pensions market probably therefore rest with the European Court of Justice, which ruled in early 2007 that Denmark was in breach of European law on freedom of movement of workers and capital by not granting tax-deductions on contributions to pension contracts with foreign insurers. Sweden has a similar case pending with the ECJ for the record.