UK citizens that have retired to Malta will need to check that their adviser is correctly registered to provide advice in the country following changes to pension rules.
Tougher rules under the Pension Rules for Personal Retirement Schemes came into effect this month in Malta (July 1).
The rules, introduced by the Malta Financial Services Authority (MFSA), mean that advisers must be regulated in the jurisdiction where their client is based.
This means that anyone who has previously transferred their UK pension into a qualifying recognised overseas pension scheme (Qrops) in Malta has to ensure that their adviser is correctly registered in Malta so they can continue to advise them.
The rules were originally implemented in January but advisers were given a six-month transition period which has now ended.
Under the tougher regulations licensed advisers must also be able to provide investment advice to the pension scheme member.
There are estimated to be about 30,000 UK pensions already transferred into Malta-based qualifying recognised overseas pension schemes.
Alex Norwood, financial adviser and pension transfer specialist at Montfort, said: "It makes sense that the regulators are keeping a closer eye on financial advisers and preventing them from working out of unregulated jurisdictions or those with very loose regulations.
"Malta has been used in the past as a way for advisers to avoid transparency and place investors into high-risk investments.
"We have many cases that come to us where we assess a member’s scheme; once we show them our analysis, they are often stunned because they had no idea what they paid at the start or what they are paying ongoing."
He added: "Qrops can be very useful in specific scenarios but are often mis-sold. We always welcome increased regulation for Qrops as we believe this will improve the overall industry."
But Mr Norwood said he was concerned about the potential impact Brexit could have on UK advisers who are regulated by "one of the best and strictest regulators around", the Financial Conduct Authority (FCA).
"If Brexit removes the ability for advisers, such as ourselves to advise those based in Malta, where does that leave these clients," he said.
"We will be seeking remedies based on the final deal but for now the future is uncertain for all UK IFAs currently passporting into Malta."
There is a 25 per cent tax charge on transfers to a Qrops which was introduced as a way to stop people from exploiting tax loopholes when transferring pension funds out of the UK to avoid UK tax.
The overseas transfer charge is effective for transfers requested on or after March 9, 2017. However, scheme members can claim back this charge if circumstances have changed and they are now exempt, for example, if the person transferring the funds becomes a tax resident in the country that the Qrops is based in.
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