Kevin Humphreys (Dublin South East, Labour)
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207. To ask the Minister for Finance the number of applications received by the Revenue in 2011 and 2012 respectively to move pension funds overseas, either to another EU country or elsewhere; if he will outline in his response the procedure for moving an Irish based pension fund abroad; if the Revenue must be informed; and if he will make a statement on the matter. [2291/13]

Michael Noonan (Limerick City, Fine Gael)
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The transfer of an occupational pension scheme member’s pension fund benefits or a Personal Retirement Savings Account (PRSA) contributor’s PRSA assets to an overseas pension arrangement is permitted, subject to the transfer complying with the Department of Social Protection’s “Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003” and Revenue rules. In that regard, there is no application process to Revenue or otherwise. A transfer can take place once it complies with the requirements of the Regulations and the rules without prior Revenue approval. Under the Regulations, in the case of occupational pension schemes, the facility to transfer only applies to a scheme member who is entitled under the Pensions Act 1990 to “preserved benefits” under the scheme - in other words to a scheme member whose service in the relevant employment has terminated .

I am informed by the Revenue Commissioners that it is the responsibility of all trustees to ensure full compliance with the requirements of the Regulations. In essence, the Regulations require that, prior to making any overseas transfer payments, the trustees and PRSA providers must be satisfied that:

(a) The member has requested a transfer.

(b) The overseas arrangement provides relevant benefits as defined by section 770 of the Taxes Consolidation Act, 1997.

(c) The overseas arrangement has been approved by the appropriate regulatory authority in the country concerned.

In practice, trustees and PRSA providers are required to obtain written confirmation to that effect from the trustees, custodians, managers or administrators of the overseas arrangement to which the transfer is to be made.

I am advised by the Commissioners that if the transfer is to another EU Member State, Revenue rules require the overseas scheme to be operated or managed by an Institution for Occupational Retirement Provision (IORPS), within the meaning of the EU Pensions Directive (known as the “IORPS Directive”), and to be established in a Member State of the European Communities which has implemented the IORPS Directive in its national law. The scheme administrator must also be resident in an EU Member State. In broad terms, the purpose of the IORPS Directive is to ensure that members and beneficiaries of occupational pension schemes are properly informed about the rules and financial position of the scheme and their rights under the scheme, and to ensure the efficient management and investment of scheme assets.

If the transfer is to a country outside the EU, under Revenue rules a transfer may not be made to a country other than the one in which the member is currently employed.

I am also advised by the Revenue Commissioners that in recent years two additional approval conditions have been introduced for all existing and new retirement benefit schemes and PRSAs in relation to overseas transfers. In late 2009, a condition was introduced to the effect that all overseas transfers under the provisions of the above mentioned Regulations may be made to facilitate bona fide transfers only, that is that they are not made with the primary purpose of circumventing Irish tax requirements. Early last year, in response to an apparent increase in requests to pension fund trustees and administrators for transfers of Irish pension funds abroad following newspaper advertisements encouraging such actions in order, for example, to access tax-free cash early, a further condition was introduced requiring a member of an occupational pension scheme or a PRSA contributor who directs the trustees of the scheme or the PRSA provider to make a transfer to an overseas scheme, to sign a declaration to the effect that the transfer conforms to the requirements of the Regulations and Revenue pension rules, is for bona fide reasons and is not primarily for the purpose of circumventing pension tax legislation and Revenue rules.

Moving pension funds abroad in an effort to frustrate Irish tax rules would fall foul of these approval conditions and could ultimately result in approval being withdrawn which would have very significant consequences for any individual concerned.

Tax relief given on pension savings is intended to encourage individuals to save for the long-term with a view to providing them with an income in retirement. That is why our tax rules, like those in many other jurisdictions, set a minimum age from which benefits from pension savings can normally be accessed. It is important that these rules are not abused and that savings built up with the benefit of generous tax reliefs are not misused.