Withdrawing super into Irish pension

kdevitt

Looks like I'll be moving home in the next few weeks or so, and am unlikely to be going for PR before I leave - meaning I can take my super with me.

I'm aware that I'll be hit for 35% tax when withdrawing it, but am wondering if anyone knows if this tax is still applied if I transfer the sum over to my Irish pension?

Peregrinus

Yes, it is.

There's no mechanism for rolling your super into a foreign pension fund, SFAIK. They'll pay it to you, subject to deduction of tax.

On the other had, once you are tax -resident in another country, you may be able to pay it as a contribution into a pension fund in that other country, and get a deduction against your tax liability in that country. Whether you can do this and how much of a deduction you will get depends on the local laws, and on your personal circumstances.

kdevitt

Peregrinus wrote: »

Yes, it is.

There's no mechanism for rolling your super into a foreign pension fund, SFAIK. They'll pay it to you, subject to deduction of tax.

On the other had, once you are tax -resident in another country, you may be able to pay it as a contribution into a pension fund in that other country, and get a deduction against your tax liability in that country. Whether you can do this and how much of a deduction you will get depends on the local laws, and on your personal circumstances.

Great - cheers. Had the feeling that might be the case.

lg123

have you considered leaving it here and claiming the pension when your old and grey?
might be a better option than loosing ~30% to the gov, though you will have many years of super fees eating into it.

Peregrinus option sounds like the best and most convenient, if possible.

kdevitt

lg123 wrote: »

have you considered leaving it here and claiming the pension when your old and grey?
might be a better option than loosing ~30% to the gov, though you will have many years of super fees eating into it.

Peregrinus option sounds like the best and most convenient, if possible.

I briefly did - but since it gets set aside and doesn't bare any interest or investment income, simple time value of money principle means it would be losing value more and more as the years go along, and thats before any fees would be taken from it (although I thought there would be no fees since its not being invested any further?).

FX rates will be still pretty decent for the foreseeable future too, so I think taking it out and putting it into my Irish pension probably makes most sense for the moment.

Peregrinus

kdevitt wrote: »

I briefly did - but since it gets set aside and doesn't bare any interest or investment income, simple time value of money principle means it would be losing value more and more as the years go along, and thats before any fees would be taken from it (although I thought there would be no fees since its not being invested any further?).

FX rates will be still pretty decent for the foreseeable future too, so I think taking it out and putting it into my Irish pension probably makes most sense for the moment.

As far as I know, if you leave it in the super fund it remains invested and earns income and gains (and suffers fees and charges) in the usual way.

However you'll probably be best to take it out, and put it into an Irish fund, since the Irish tax treatment of retirement funds is more advantageous than the Aussie version.

jank

Peregrinus wrote: »

As far as I know, if you leave it in the super fund it remains invested and earns income and gains (and suffers fees and charges) in the usual way.

However you'll probably be best to take it out, and put it into an Irish fund, since the Irish tax treatment of retirement funds is more advantageous than the Aussie version.

How so? I would have thought the Irish fees and charges would have been lot more than n Australia. Didn't the government dip their hand into the private pension pot as well? If it were me I would leave it there for 30+ years. It should grow quite well.

kdevitt

Peregrinus wrote: »

As far as I know, if you leave it in the super fund it remains invested and earns income and gains (and suffers fees and charges) in the usual way.

I was told this isn't the case - not for a 457 holder anyway. Once I'm gone 6 months, and no further contributions have been made, my super fund gets transferred over to an ATO unclaimed funds accounts where it sits dormant until I do decide to claim it back. Its part of the reason for me asking on here though - its pretty difficult to get specific answers online.

To be honest, even if this isn't the case - theres a significant FX risk to leaving it here for 30 years and hoping the rates don't go down given I'll be spending it as a 65+ year old in the Euro zone (assuming the Euro lives on!)

lg123

who tells the super fund you are gone? no contributions could be for many different reasons.

great point re the FX rates, never thought of that. i would be very surprised if the AUD is as strong in 5 years, never mind 35.

kdevitt

lg123 wrote: »

who tells the super fund you are gone? no contributions could be for many different reasons.

Automatically happens once no contributions have been received for 6 months apparently!

jank

http://www.pomsinoz.com/forum/moving-back-uk/164878-any-advice-about-getting-super-back-lived-oz-5-yrs-perm-residency.html

This may help.

Peregrinus

kdevitt wrote: »

I was told this isn't the case - not for a 457 holder anyway. Once I'm gone 6 months, and no further contributions have been made, my super fund gets transferred over to an ATO unclaimed funds accounts where it sits dormant until I do decide to claim it back. Its part of the reason for me asking on here though - its pretty difficult to get specific answers online.

Now that I check this, you're correct that your super will be transferred to the ATO after six months. You cannot leave it in your chosen fund.

But, although super transferred to the ATO has not attracted interest up to now, from 1 July 2013 it will accrue interest (at a rate to be prescribed by regulations, but I think the intention is to prescirbe interest at a rate equal to the annual yield on 10-year Treasury bonds). Plus, it will suffer no deductions for investment charges, administration charges, etc, which it would suffer if left in your fund. Nor will it suffer the 15% tax that it would suffer if left in the fund.

Whether the net return under this arrangement will be better or worse than if the money had been left in your super fund (or better or worse than what you might get in an Irish fund) I can't say.

kdevitt wrote: »

To be honest, even if this isn't the case - theres a significant FX risk to leaving it here for 30 years and hoping the rates don't go down given I'll be spending it as a 65+ year old in the Euro zone (assuming the Euro lives on!)

If you could leave the money in your fund, you could guard against foreign exchange risk by selecting an overseas or euro investment fund. But obviously you have no investment options if the money is transferred to the ATO.

Peregrinus

jank wrote: »

How so? I would have thought the Irish fees and charges would have been lot more than n Australia. Didn't the government dip their hand into the private pension pot as well? If it were me I would leave it there for 30+ years. It should grow quite well.

I don't know that it's generally true that investment costs are higher in Ireland than in Australia, but even if it is true that's irrelevant. The appropriate comparison would be bewteen the investment charges and deductions in the particular Aussie super fund that you are in, versus the charges and deductions in the particular Irish pension fund that you would chose, were you to transfer the money to Ireland.

But the other factor you have to consider is tax. The Irish tax regime for money invested in pension funds is markedly more generous than the Aussie tax regime for super funds, and you'd have to factor this into the calculation as well. Aussie super pays 15% tax annually on investment earnings in the fund (Irish pension funds: 0%) and then a further 15% on the total amount when withdrawn as a benefit (Irish withdrawals: partly tax-free, partly ordinary income tax rates - which, if your pension is your main income, means you get your tax-free allowances, lower rate bands, etc to set against it).

jank

That 15% is already paid when you put it into super so the lump sum has that included into it already. Then I think any benifit from that when you reach retirement aged is tax as it would income tax. Are you saying people in Ireland who have a private pension dont pay any tax on their pension once they start withdrawing it?

Peregrinus

jank wrote: »

That 15% is already paid when you put it into super so the lump sum has that included into it already. Then I think any benifit from that when you reach retirement aged is tax as it would income tax.

There’s a 15% tax on contributions paid, but there is also a 15% tax on income and gains earned within the fund each year - and, overall, this ends up costing you much, much more than the 15% tax on the contribution paid. Ireland has neither of these things.

jank wrote: »

Are you saying people in Ireland who have a private pension dont pay any tax on their pension once they start withdrawing it?

A substantial amount can be withdrawn in a tax-free lump sum. (Exactly how much depends on your circumstances, and the kind of super fund you’re in, but it’s always pretty substantial.) And even as regards the balance, tax is totally deferred until the benefit is paid, as opposed to only partly deferred, which is what happens in Australia.

The purpose of tax reliefs and deferrals on retirement savings is to encourage people to save for retirement. But when, as in Australia, saving for retirement is compulsory, there is strictly speaking no need to offer tax incentives to encourage it. Favourable tax treatment remains politically popular, of course, which is why the tax incentives have not completely disappeared. But, since super was made compulsory, the tax advantages have been considerably whittled down and they are, for the most part, now significantly less attractive than they used to be and, more to the point in the present context, significantly less attractive than they still are in Ireland.