Overseas pension transfers surge post-Brexit

Overseas pension transfers surge post-Brexit

Offshore advice firm De Vere has reported a surge in inquiries from people looking to move their UK defined benefit pensions overseas ahead of the imminent triggering of Article 50.

Since December, the firm saw a 21 per cent increase in the number of inquiries, which it put down to the approaching March deadline for the commencement of formal Brexit negotiations.

Other financial advisers have disputed this link, however.

Prime minister Theresa May announced in October that the government would trigger Article 50 by the end of the first quarter of 2017, putting the deadline a matter of weeks away.

De Vere chief executive Nigel Green said there had been a "groundswell" of interest in transferring DB schemes into recognised overseas pension schemes (generally referred to by the acronym "Qrops") since the June vote.

This, he said, had intensified in recent weeks, adding he expected the trend to continue as the Brexit deadline gets nearer.

"It’s understandable why so many are considering transferring their UK pensions into an HMRC-recognised overseas pension scheme at the moment. They recognise the golden opportunity right now," Mr Green said.

Mr Green said there were three reasons why now was a "golden opportunity" to transfer a DB pension into a Qrop.

They were: record high transfer values, increasing risk of DB schemes failing, and uncertainty over the UK's future once Brexit has been negotiated.

On the latter point, Mr Green said: "And third, no-one knows for sure what a post-Brexit Britain will look like and how the economy will fare. 

"If there is an economic downturn, for example, it would become increasingly difficult to fund pension schemes. Plus, the value of the assets that the schemes invest in would likely depreciate."

However Geraint Davies, managing director of international specialist firm Montfort International, said the connecting Qrops with Article 50 was "total and utter bunkum". 

He said the decision to transfer a pension overseas was "about what is in the client's best interests, taking into account all future requirements and plans".

He said any increased interest in DB transfers was down to record high transfer values, not the imminent triggering of Article 50.

Qrops and Sipp specialist Momentum Pensions said it had seen significant increase in business since the referendum, but did not link the two.

“Momentum Pensions has experienced significant year-on-year growth of 40% since Brexit," Stewart Davies, the firm's chief executive, said. 

"However, we are not convinced that this is related to Brexit alone. While people are of course looking to address the uncertainties that have resulted from the vote to leave the EU, there are other factors at play."

Financial advisers have reported a surge in DB transfers since pension freedoms were brought in in 2015, augmented by a surge in transfer values in the second half of 2016.

On Wednesday (4 January), Xafinity reported that transfer values ended 2016 up 15 per cent on the previous year. 

That meant a 64-year-old with a DB pension worth £10,000 a year would have received an additional £31,000 if they had transferred out on 31 December 2016 rather than 31 December 2015.