DWP to ditch overseas pension transfers advice requirement

According to the DWP's consultation paper, published today (30 September), the government believes it is important individuals have the freedom to access their pension savings in the way that suits their needs best.

The DWP's call for evidence seeks to gather information on how the requirement to take advice is working for overseas members, and whether the current process should be maintained or adapted, to work better for individuals who are moving or already resident overseas.

It also explores whether an alternative process to the existing advice requirement can and should be developed for overseas transfers.

The DWP paper stated: "As this represents a significant step, government would need to carefully consider whether the potential benefits and risks of changing the requirement for one group of safeguarded members is in their interests, including whether any alternative can in fact offer the same consumer protections."

According to the DWP, there is an understandable lack of current and historical data available about the numbers of members who could seek to transfer safeguarded benefits overseas, given the advice safeguard has only been in place since April 2015.

The DWP has undertaken some analysis which suggests there could be around 700,000 individuals living abroad with private sector contracted-out salary related defined benefit pensions not yet in payment.

The estimates do not include those with funded public sector defined benefit pensions, and non-salary related safeguarded benefits such as guaranteed annuity rates.

However, according to the DWP, only those with a cash equivalent transfer value greater than £30,000, that wish to transfer their pension, are affected by the advice requirement and the total figure for those potentially impacted by the requirement to take advice therefore may be less. 

"This is highly complex advice and anybody who suggests otherwise is propelling the consumer into being hoodwinked (yet again).Geraint Davies

Mike Morrison, pensions expert at AJ Bell, said: “The advice requirement was introduced to protect savers from losing valuable guarantees when they transfer to a defined contribution scheme in order to take advantage of the pension freedoms.

“This protection is arguably even more crucial for people moving their money to overseas schemes, where regulations and advice standards are likely to be lower than in the UK.  

"In considering how to make it easier for people living overseas to get advice on a potential pension transfer the consultation needs to ensure it does not water down the advice requirement so much that overseas transfers can be made without any advice at all.  

"This could open the door to unscrupulous pensions salesmen and at the same time reduce the Treasury’s tax take as it becomes easier for people shift their savings to different tax jurisdictions.”

But Geraint Davies, managing director at Montfort International said: "Hallelujah in one breath but heart stopping reaction in the next breath. 

"At long last we are seeing awareness that a problem exists – with regards to overseas pension transfers. 

"The whole process definitely needs an overhaul – but perish the thought of overseas advisers being given carte blanche to do as they wish because if this happens the scammers and the rogues will be gearing up for an even bigger pay day and consumers will suffer."

He added it is bad enough as it is with offshore bonds sitting in so many recognised overseas pensions.

"So why not have a register of advisers held by the FCA who have in place the right processes, with advisers with a network of international tax specialists, with reports that meet certain standards and conjoined advice between overseas and UK advisers with the latter having to have a register of the advisers they deal with overseas?

"This is highly complex advice and anybody who suggests otherwise is propelling the consumer into being hoodwinked (yet again) and into thinking that any overseas pension transfer is a walk in the park when it absolutely isn’t needs to seriously question what planet they are on. 

"We will be certainly sharing our war stories and so will many victims of lack of controls."