Irish Pensions Avoiding Irish Tax on Pensions

Irish Pensions Avoiding Irish Tax on Pensions

Irish Pensions: The new Irish tax on pensions may now be avoided though a transfer to a QROPS (Qualifying Overseas Pension Scheme). The new Irish pensions levy (starting initially at 0.6% pa on pension fund assets) announced in May 2011, 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 (Irish tax on pensions) applies to individual pension policies (“retirement annuity contracts”), company pension schemes, personal retirement bonds, (non-vested) PRSAs and buy-out bonds. The new pensions levy has been branded a tax on savings and jobs. This is a tax on the working man. For wealthy people, we can help you transfer your pension offshore through a QROPS transfer. You only need a pension pot of about 100,000 Euros for it to be worthwhile.

STOP PRESS. QROPS NEWS. Please click here for latest QROPS Rules for Pension Transfers to Ireland.

So, for the majority of people with Irish Pensions, you can now avoid the new irish tax on pensions that you hold. The best way is though a transfer to a QROPS scheme. Your Irish pension is held in the Isle of Man or Guernsey where it will grow tax free. Then the pension can be paid directly into your Irish bank acount.

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Irish Pensions QROPS Transfer

Irish Pensions Changes to Irish Pensions

The Irish government has unveiled plans to cut public spending by €2.1bn, and almost €1.4bn of this will be achieved by requiring public sector workers to pay a new pension ‘levy’ averaging 7.5% towards their Irish pensions.

The government said the new ‘pension-related deduction’ would apply to the total earnings of all public servants, though not those already receiving a pension, and would be “graduated so that the effect is somewhat less at lower income levels and greater at higher levels”.

The average deduction will be 7.5% of total earnings, although the contribution will be made up of 3% on the first €15,000 of pay, 6% on the next €5,000 and a 10% levy on the remainder of earnings.

A table showing the effect of the contributions means the lowest paid public sector workers, on €15,000 a year, would contribute 3%, or €450 a year, while those earning €25,000 would pay 5%, or €1,250 a year on their Irish pensions.

Peter McLoone, general secretary at Impact (the largest public service union in Ireland), said the government’s decision would mean a public servant earning €770 a week before tax “would have to pay an extra €52 pension hike a week on top of their existing tax, pension contributions and the new 1% levy” – the income levy announced in the 2008 Budget.

So, how can you avoid this Irish tax on pensions?

Irish Pensions Irish Pensions Levy and QROPS

The solution for larger Irish Pensions which wish to avoid these new taxes on Irish pensions is to move your Irish pension into a QROPS. The QROPS is usually held offshore in a secure jurisdiction such as the Isle of Man or Guernsey and you will be able to avoid the new taxes on your pension. Furthermore, you would have freedom of investment which means that you have the possibility of earning a higher return on your pension through smart investments. For low risk clients, we can help move into funds which offer 100% capital protection as well as an attractive rate of return.

Irish clients 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:

  • the Irish trustees/provider have satisfied themselves that the retirement benefits to be provided under the overseas arrangement are retirement benefits, by obtaining written confirmation to that effect from the trustees, custodians, managers or administrators of the overseas arrangement to which the transfer is to be made;
  • and the Irish trustees/provider have satisfied themselves that the overseas arrangement has been approved by an appropriate regulatory authority for the country concerned.

Up to 1/4 of Irish pension funds may be moved offshore to avoid the controversial new pensions levy on private schemes, a survey conducted by pension advisers Towers Watson has found. Furthermore, 8 out of 10 schemes may be scaled back or closed because of the higher cost imposed by the levy. The levy of 0.6pc on private pension assets could reduce pension payments by between 8% and 10% for the period of the levy.

Towers Watsomn found that 6 out of 10 companies with defined benefit schemes confirmed that they would not be able to absorb the cost of the pensions levy. Instead, they would be seeking to pass this charge on to pension scheme members through benefit reductions.

These changes to Irish Pensions have led to 1 out of 4 Towers Watson clients saying they would consider moving their pension scheme offshore to avoid the levy charge. The proposed levy is bad news for private pensions, especially considering that the return rate of the average Irish pension has only been around 1.7 per cent over the past 10 years, according to a recent report of public pension funds.

A move to a QROPS means freedom of investment choice and most schemes aim to make at least 6% after all the charges are taken into consideration.

What taxes would I pay on my Irish pension if I move to a QROPS?

If you are living in Ireland, you avoid CGT and IHT as well as avoiding the pensions levy which may be as much as 8% – 10% on the value of your pension pot. The pension is paid out gross and then it is up to you to pay the Irish income taxes. If you are living or retiring outside of Ireland, you would avoid all Irish taxes.

Please enquire about our QROPS Ireland pension transfer scheme.

For more information, please send enquiries to info@qropsspecialists.com

Avoiding Irish Tax on Pensions written by QROPS Specialists.

Irish Pensions Avoiding Irish Tax on Pensions by


  • Hi Richard,

    There is alot quoted about Public Sector and active defined benefit schemes. These can’t be moved by individuals to oversea pensions so can you specify the process for individuals with Self-Administered Pensions and private pension trusts.

    Also what does IHT stand for?


    • Hi David,

      Actually it is possible to move final salary schemes even in drawdown, it is just a little more complicated. It involves hiring an actuary to work out the transfer value. Although each case is different and in most circumstances it is still up to the custodian to decide whether they will allow a transfer. If they do, it has to be a ‘like-for-like’ pension. Each case is different. Please email me at info@qropsspecialists.com for more info.

      Best regards,


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