Malta is introducing tougher pension rules which mean that advisers must be regulated in the jurisdiction where their client is based.
From July 1, 2019 retirees who have transferred their UK pension into a Malta-based overseas pension scheme need to ensure they can still be fully serviced by their adviser as the new rules come into effect.
DeVere Group, a financial consultancy, warned that under the tougher regulations licensed advisers must also be allowed to provide investment advice to the pension scheme member.
In addition, the adviser must be regulated in the jurisdiction where the client is based.
James Green, deVere’s divisional manager of Western Europe, said: "It is highly likely that many advisory companies will be unable to meet some or all of the stringent new regulations and, therefore, will not be able to service new or existing clients in this area.
"As such, I urge all retirees to check as a matter of urgency that their financial adviser is able to fulfil their obligations in accordance with the sweeping rule changes."
From July, changes to pension rules by the Malta Financial Services Authority (MFSA) will impact the way in which the pension trustees administer both new scheme applications and existing members on a number of levels.
There are estimated to be about 30,000 UK pensions already transferred into Malta-based qualifying recognised overseas pension schemes.
Mr Green said: "Malta is a preferred jurisdiction for those wanting to take advantage of the considerable financial benefits of transferring their UK pensions outside of the UK."
Claire Trott, head of pensions strategy at St. James’s Place Group, warned that transfers to overseas pensions need to be carefully considered as it may not always be the best thing to do.
She said: "Taxation in retirement often drives these transfers, yet in many cases at retirement the pension can be paid tax free in the UK whereas it can be taxed as income in the country in which the member is resident at the time, even if it is at a better rate.
"In addition, many people will return to the UK later in life or move elsewhere, which can then cause additional issues should they want to move their pension back to the UK or on to another country.
"Overseas pension schemes may not allow the onward transfer of a pension, and a UK pension scheme may not be willing to accept the funds back from an overseas scheme, especially if not held in sterling or already in payment."
Ms Trott has also warned on the importance of specialist advice so that individuals can establish the full implications of transferring to an overseas scheme.
"Over the years many have transferred overseas for various reasons, but more recently we have seen increasing numbers of people wanting to bring their funds back to the UK," she said.
"This could be for various reasons but in most cases it is because circumstances have changed meaning an overseas pension scheme becomes an unnecessarily complex addition to their retirement."
amy.austin@ft.com
