Overseas residents may end up paying twice for advice under new pension transfer rules proposed by the regulator.
David Trenner, technical director at Intelligent Pensions, raised concerns surrounding changes to the Financial Conduct Authority transfer rules, stating that while the focus has been on the definition of safeguarded benefits and the need for a specialist, there is a small section in the feedback document which seems to have passed without comment.
“This is the section dealing with ‘overseas residents’ and that they may end up having to pay for two advisers and therefore paying twice. This has to be an unintended consequence and as such should be amended.”
The FCA noted that there are two stages in the advice process: ‘is a transfer suitable?’ and if so ‘where should the money be transferred to?’, highlighting that UK authorised advisers may not have knowledge of local tax regimes and pension rules.
It noted that the regulator is engaging with the Department for Work and Pensions to consider whether amendments should be made to the rules for non-UK residents.
Mr Trenner said that while there should be some sympathy with clients needing to pay two advisers, it is “absolutely essential” that the requirement for a UK registered transfer specialist is retained.
“We have in the past seen overseas advisers transferring DB values into Qrops with no benefit comparison and the only ‘reason why’ given being that they are no longer in the UK, so they would not want their pension to remain in the UK.”
He added: “A professional firm will set up an arrangement with offshore specialists to ensure that the UK adviser understands all of the relevant aspects of the overseas jurisdiction, and the resulting team will be stronger than the sum of the two parts.”
Martin Tilley, director of technical services at Dentons Pension Management, pointed to anecdotal evidence of inflight magazines being full of advisers advertising about taking pensions abroad.
He said: “The quality of some overseas advisers has been questionable however, as a provider we have seen clients approached to transfer overseas when there appears to have been little good reason to do so.”
He noted that it is The Pensions Regulator which imposed the need for advice to be sought before a defined benefit scheme can action any transfer request and in the UK only a qualified and authorised adviser can provide that advice.
Mr Tilley said: “I would agree that to maintain a level playing field, the advice of a UK transfer specialist is essential. There are UK firms who specialise in transfers overseas, who have knowledge not only of UK transfer analysis but also overseas schemes and local taxation.”
peter.walker@ft.com
