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Michael O’Sullivan V Canada Life Assurance (Ireland) Limited

  • Ireland
  • General

25-04-2014

On 1 April 2014, Mr Justice Ryan delivered judgment in a case concerning the refusal by Canada Life to facilitate an overseas transfer of PRSA assets to a Maltese pension arrangement. That decision was challenged by Mr O’Sullivan leading to Mr Justice Ryan’s decision in the High Court earlier this month. The decision represents an important precedent in the context of the overseas transfer of pension assets.

Background

The case concerned the Occupational Pension Schemes and Personal Retirement Savings Accounts (Overseas Transfer Payments) Regulations 2003 and certain related Revenue circulars. The Revenue circulars were issued in 2009 and 2012 to impose stricter conditions on overseas pension transfers. Specifically, the 2012 circular introduced a requirement whereby a member of a pension scheme or PRSA wishing to make an overseas transfer must sign a declaration to the effect that the transfer is for “bona fide reasons and is not primarily for the purpose of circumventing pension tax legislation and Revenue rules”.

Before the court, Revenue argued that it is incumbent upon PRSA providers to endeavour to ensure that the signed declaration is what it appears to be and that a declaration could not be accepted where it did not make sense due to some other circumstances of which the provider was aware or some additional information which the provider had on file.

The Bona Fides Issue

In analysing this issue, the court noted that the key question was whether the provider was required to evaluate the information provided in the declaration. The court ultimately found that the provider does not have to investigate the circumstances of the transaction as it is “not obliged to conduct an independent examination and evaluation of the motives of the fund owner”. This was provided there were no facts which would “give rise to suspicion as to the bona fides of the transaction”.

However, having helpfully clarified the role of the provider in dealing with this issue, the court was reluctant to lay down a general rule and stated that everything would depend on the “circumstances of the particular case”.

While the decision gives providers some more definitive parameters on the extent of their role in deciding whether a proposed transaction may breach the bona fides requirement, the proviso that everything would depend on the circumstances means that reliance on the decision should be treated with caution.

At the very least, providers are now in a position where they can justifiably refuse a transfer where they are on notice of something which raises a suspicion as to the bona fides of the transaction.

Is an employment connection necessary?

The second limb of the court’s decision concerned the interpretation of whether in the case of the overseas transfer of PRSA assets a requirement for an employment connection with the transferee’s jurisdiction arose. The court held that no such requirement exists in the case of PRSAs as to read such a requirement into the regulations would defeat their purpose; “PRSAs are not related to employment; they can be taken out regardless of employment status”.

The decision therefore represents a strong precedent to the effect that overseas transfers can be made in respect of PRSAs where no employment connection arises as between the PRSA holder and the relevant overseas jurisdiction, absent any concerns as to the bona fides of the transaction.

The decision also seems to recognise that an employment connection should apply in the context of occupational pension schemes and overseas transfers. However, the decision did not explicitly address this issue and given some of the evidence before the court, which argued that no such requirement arises in the case of occupational pension schemes either, this is something that may yet be tested before the courts.

 

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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