Court paves the way for transfer of PRSA funds abroad
The Irish High Court recently provided some useful clarification in the area of the transfer of personal retirement savings accounts (“PRSAs”) overseas. The case of Michael O’Sullivan v Canada Life Assurance (Ireland) Limited involved a PRSA contributor who had requested Canada Life, the PRSA provider, to make a transfer in respect of his fund to a pension arrangement based in Malta. Mr O’Sullivan was neither resident nor employed in Malta at the time of the request.
Canada Life sought the consent of the Revenue Commissioners to the proposed transfer. Revenue indicated that it was for Canada Life to determine whether the transfer could proceed, having regard to the Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003 (the “Transfer Regulations”) and related Revenue circulars and guidance, in particular a requirement outlined in the circulars that the transferee sign a declaration that the transfer is for “bona fides [good faith] reasons and cannot be primarily for the purpose of circumventing pension tax legislation and Revenue rules”.
Canada Life indicated that it was not willing to facilitate the transfer. The reasoning given was that, as Mr O’Sullivan did not reside in and nor was he employed in Malta, it was not satisfied that the transfer was for bona fides reasons as required by Revenue. Mr O’Sullivan then issued proceedings against Canada Life seeking to compel them to facilitate the transfer. Revenue were joined as an amicus curiae (a friend of the court) to the proceedings. The term describes someone who offers information of assistance to the court, but who is not a party to the case.
The Transfer Regulations provide that, subject to certain conditions, a member of a pension scheme, or a contributor to a PRSA, may transfer his fund to an overseas arrangement. The term “overseas arrangement” is defined in the Transfer Regulations as “an arrangement for the provision of retirement benefits established outside the State”.
Mr Justice Ryan examined whether, in the case of the overseas transfer of PRSA assets, there is a requirement for an employment connection with the jurisdiction to which the funds are being transferred. Although a strict reading of the legislation would appear to indicate that such a connection is required, the court held that as PRSAs are not related to employment, no such requirement exists in the case of PRSAs. The court took the view that reading such a requirement into the Transfer Regulations would defeat their purpose.
Implicit in the decision was that an employment connection is required in the case of an overseas transfer from an occupational pension scheme. The decision did not, however, directly address this point and this, therefore, remains an issue that may yet be tested before the courts.
The court also considered the implications of the bona fide requirement for overseas transfers. Although Revenue argued that PRSA providers should examine the circumstances surrounding a declaration signed by a transferee to ensure that it is what it appears to be, the Court found that in circumstances where the provider had no reason to suspect the bona fides of a transaction, the Transfer Regulations do not require a PRSA provider to conduct an independent examination and evaluation of the motives of the PRSA holder. The Court found that unless there was something which caused the provider to be suspicious of the bona fides of the request, the provider is free to proceed with facilitating a transfer request. The court did indicate, however, that it was not prepared to lay down a general rule in this regard and that everything would depend on the circumstances of a particular case.
This decision has important implications for the Irish pensions industry as the judgment removes a significant obstacle for those seeking to transfer funds abroad.