A recent judgment of the High Court, in the case of O'Sullivan v Canada Life Assurance (Ireland) Ltd, confirms that PRSA holders may move their retirement benefits to overseas pension scheme administrators in the EU, even if living and working in Ireland.
While its precise implications are as yet unclear, the judgment provides useful guidance to pension scheme administrators on the approach to be taken in dealing with a request to transfer a PRSA fund to an overseas pension scheme administrator.
Under the Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003 (SI No 716/2003) (the "Transfer Regulations"), a Personal Retirement Savings Account ("PRSA") contributor may transfer his fund to an overseas arrangement.
Mr O'Sullivan had a PRSA policy with Canada Life Assurance (Ireland) Limited ("Canada Life") to the value of €116,000. He wished to transfer the policy to a pension scheme based in Malta and instructed Canada Life to carry out the transfer. Mr O'Sullivan was neither resident nor employed in Malta.
Canada Life sought the approval of the Revenue Commissioners (the "Revenue") who said that it was for Canada Life to determine whether to accede to the request, having regard to the Transfer Regulations and, in particular, the requirement that the transfer be for bona fides reasons. Canada Life declined the request on the grounds that, as Mr O'Sullivan did not reside in and was not employed in Malta, the transfer was not for bona fides reasons.
Mr. O'Sullivan issued proceedings seeking to compel Canada Life to make the transfer. At the suggestion of the Court, the Revenue were joined as an amicus curiae (friend of the court) to allow them to make submissions on the interpretation of the Transfer Regulations.
The Court found that there was no evidence of mala fides on the part of Mr O'Sullivan and that the Transfer Regulations did not require that he be resident in or employed in Malta in order to transfer his PRSA policy there. Mr Justice Ryan stated that two conditions or provisos specified in the Transfer Regulations must be considered and satisfied when a transfer request is made, namely:
- that the transfer is for bona fides purposes; and
- that the overseas pension scheme administrator provides "relevant benefits" as defined in section 770 (1) of the Taxes Consolidation Act 1997 (the "TCA").
TRANSFER FOR A BONA FIDES PURPOSE
On the issue of bona fides, the Court had to consider whether a pension scheme administrator has to perform an evaluation of the reasons for the requested transfer of the funds. The Court held that, provided there is nothing in the facts of the case as presented to give rise to a suspicion as to the bona fides of the transfer, the pension scheme administrator is free to implement the wishes of the owner of the fund. However, the Court made it clear that it was not laying down a general rule and that each case would depend on its own particular circumstances.
In the current proceedings, Mr O'Sullivan had signed a Transfer Declaration Form, in accordance with a requirement introduced by the Revenue in 2012, confirming that the transfer (i) conformed to the requirements of the Transfer Regulations and Revenue pension rules; (ii) was for bona fide purposes; and (iii) was not primarily for the purpose of circumventing pension tax legislation or Revenue rules. The Court held that, in the circumstances of the case, Canada Life was not obliged to conduct an independent examination and evaluation of Mr O'Sullivan's motives; the fact that he wanted to transfer his PRSA to another EU member state was not, in itself, an indicator of any suspicious circumstances.
PROVISION OF "RELEVANT BENEFITS"
Under the Transfer Regulations, a PRSA may be transferred overseas provided that the PRSA provider is satisfied that the retirement benefits to be provided under the overseas arrangement are "relevant benefits", as that term is defined in the TCA.
It was argued, on behalf of Mr O'Sullivan, that "relevant benefits" are any pension, lump sum, gratuity or benefit paid on either death or retirement. As the benefits under the Maltese scheme were payable on either the death or retirement of the member, it was submitted that the scheme met the legislative requirement to provide "relevant benefits".
Mr Justice Ryan stated that, while it made sense for there to be a proviso concerning an employment connection in the case of occupational pension schemes, the same did not apply in the case of PRSAs which can be opened regardless of employment status. He noted that the clear intention of the Transfer Regulations was to facilitate the transfer of both occupational pensions and PRSAs to overseas pension scheme administrators. If the proviso as to "relevant benefits" was interpreted to require an employment connection, the effect would be that PRSAs entered into by self-employed persons could not be transferred overseas.
Accordingly, the Court concluded that the Transfer Regulations did not require that Mr O'Sullivan be resident or employed in Malta in order to transfer his PRSA policy there.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.