Personal Pension  

Overseas pension transfers to require two advisers

Overseas pension transfers to require two advisers

Transferring defined benefit pension schemes into Qrops is going to become even more complicated under new FCA proposals, pension experts have said.

“The proposed requirement for all advice to be a personal recommendation may mean that the UK advisor involved in the transfer takes on greater responsibility than they currently do,” the 65-page consultation paper published today (21 June) stated.

The FCA wants advisers to carry out a detailed appropriate pension transfer analysis that compares financial and tax regimes in two countries in order to transfer a defined benefit scheme to a Qrops.

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The analysis must cover projection rates, inflation levels and exchange rates in relation to the destination of the pension transfer

Pension experts said that the new regime is likely to result in fewer pensions being transferred overseas once the proposed new rules come into force next year.

“It looks like advising on transfers to Qrops will become more onerous under these revised proposals,” said Nathan Long, senior pensions analyst at Hargreaves Lansdown.

“The specialism of this advice already demands high fees which are likely to increase. On balance we would expect a decline in the number of defined benefit pensions being transferred overseas on the back of these proposals.”

Mike Morrison, head of platform technical at AJ Bell, said that the new transfer analysis requirement, as well as the suggestion that advisers should work with an overseas adviser in the destination territory to understand where the funds are likely to be transferred, could result in investors paying more.

He said: “Qrops is already a complicated area and the proposals in today’s consultation paper are likely to make defined benefit transfers to Qrops even more complicated.

“Qrops transfers require detailed knowledge of the individual’s broader circumstances beyond the pension scheme and so advisers are likely to have to treat these as a personal recommendation, rather than a simple transaction, and comply with the rules that relate to personal recommendations.”

However David White, partner at The Qrops Bureau, based on the Isle of Man, praised the FCA for its decision to involve overseas advisers in their new pension transfer advice rules. 

He said: "The FCA consultation recognises that overseas pension planning is a complex area in which UK advisers may not have relevant experience.

"The guidance issued by the FCA in January and this latest consultation acknowledges that there may be two advisers involved and will require detailed communication between the two advisers to ensure that the UK adviser, who is giving the advice on whether or not to transfer away from the scheme providing the safeguarded benefits, and the overseas adviser, who may be providing the ongoing investment advice."

Back in March, the Financial Conduct Authority told Dubai-based Holborn Assets to “immediately cease” all regulated activity relating to pension transfer business introduced by overseas advisers until a skilled person has signed off the company’s advice process.