Since the rules introduced by S.I 716/2003 – Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003, pension holders have been able to transfer their pension funds to an overseas arrangement.
Since the pension levy was introduced in Ireland in 2011, numerous providers have advised pension holders to transfer their pensions to overseas jurisdictions, most notably Malta and Gibraltar, which allow easier access to the funds and where the pension levy is avoided.
In the recent case of O’Sullivan v. Canada Life Assurance (Ireland) Limited  IEHC 217, the Plaintiff complained that his provider, Canada Life, were refusing to transfer his fund abroad as they did not believe it was for a ‘bona fide’ reason. Revenue introduced the ‘bona fide’ concept in 2009 in order to stop the artificial transfer of pension funds out of Ireland, which would undermine the primary purpose of the tax relief granted on pension funds, ie to encourage individuals to save for retirement. Ultimately the Court found that the Plaintiff was entitled to transfer the fund once he signed a declaration that the transfer was ‘bona fides’.
However, should Revenue determine that the transfer of the funds was not for ‘bona fide’ purposes, which relate almost exclusively to situations where the individual is moving abroad, they may withdraw their approval for the transfer. Section 787K(4) of the Taxes Consolidation Act 1997 provides that:
‘Where approval of a product is withdrawn pursuant to section 97 of the Pensions Act, 1990, there shall be made such assessments or amendments of assessments as may be appropriate for the purpose of withdrawing any relief given under this Chapter consequent on the grant of the approval’
Individuals who have been advised to transfer their funds abroad, therefore, may soon find themselves liable for income tax, including interest and penalties, from the date the money was earned up to the date of payment of the taxes, which in some cases could be many years, resulting in huge revenue liabilities.
In such circumstances, individuals affected may have claims against those professional advisers who advised moving the pensions abroad, and who ignored the potentially catastrophic liabilities that the pension holder was being exposed to.
Please contact our Solicitors through phone (1800)844104 Free Phone or email us at [email protected]