Rowanmoor Pensions is warning IFAs who recommend pension schemes move to Ireland that they will attract regulatory scrutiny.
The small self-administered scheme (SSAS) provider says IFAs have recommended trustees make the move as Ireland does not require retirees to buy an annuity. They are also allowed to leave the fund to beneficiaries on death, although it will come under Irish inheritance tax (IHT) at 20%.
However, trustees can only transfer a pension scheme to Ireland if a genuine trading company where the member works exists in the country.
Rowanmoor understands trustees have received offers to establish trading companies, employment contracts and accommodation to UK companies in an attempt to break the UK pension scheme rules.
The provider says IFAs who get involved in such practices would likely become the subject of Pensions Regulator, HMRC and FSA enquiries.
David Seaton, director of consultancy at Rowanmoor Pensions, says: “Having visited Dublin, as a past chairman of the Association of Pensioneer Trustees, and spoken to the Association of Pensioneer Trustees Ireland (APTI), I was told that the requirements for a transfer to Ireland are that an Irish self-directed trust, like the UK SSAS, can only be established by a genuine Irish registered company trading and there must be a proper employer-employee relationship.
“Once established, the UK pension fund can be transferred to Ireland. If the scheme meets the Irish Revenue requirements then they approve the scheme under their discretionary powers. If they do not, or the Revenue believes the employment or trade is not genuine, then approval will not be given and any monies transferred will remain in limbo and eventually taxed as a non-approved scheme."
He says the Irish scheme must also obtain the status of a Qualifying Recognised Overseas Pension Scheme (QROPS) from the UK HMRC, as without QROPS status the transfer from the UK scheme will become an unauthorised payment, which could result in a combined tax charge of 104%.
He says: “I was also warned that the Irish Revenue and the UK HMRC both communicate to ensure only genuine transfers take place. I was told that the Irish Revenue sees it as suspicious for a new company to establish a pension scheme in its first year of trading and will fully investigate.
"There are added complications to being a UK member of an Irish pension scheme and any contribution made in Ireland must be disclosed in the UK as a benefit in kind.”
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First mentioned in Cridland Report
Second acquisition of 2019