Financial Conduct Authority issues warning to firms advising on pension transfers

User Written by Sam Barrie on February 03, 2017.

Financial Conduct Authority issues warning to firms advising on pension transfers

Last week the Financial Conduct Authority (FCA) issued a stern warning to firms advising on both international and domestic pension transfers following a number of reports that clients’ funds are being deliberately misallocated or, even worse, outrightly scammed.

Unfortunately, Dubai is renowned for having many unsavoury characters working within the financial planning industry. The combination of expatriates enjoying tax-free earnings and almost non-existent regulation in the country creates an environment in which many (although not all) so-called advisers, who in reality have minimal qualifications, can easily take advantage of the situation to put their own interests above those of clients. In addition, there is no recourse whatsoever in Dubai for those who become victim to poor, dishonest advice.

International Adviser magazine was informed by an industry source that the FCA were looking into more than one advisory firm in Dubai encouraging clients to transfer Defined Benefit (DB) schemes. One case in particular was highlighted in which a pension transfer was made overseas with assurances given to the client that the funds would be allocated to a portfolio of low cost ETFs (passive funds). Instead, the money was moved to a Mauritius-based fund which gave the advisory a high up-front indemnified commission.

Transferring your pension scheme overseas to a QROPS is not a decision to be taken lightly. It requires a full analysis both of your UK schemes and your aggregate position. I have carried out analyses of this kind for many clients and can tell you that approximately 50% of the pensions that I have looked at were best left in the UK and this is, of course, the advice that I passed on. I came to this conclusion by taking into account a number of factors including:

• High Critical Yield (necessary growth rate to match existing benefits)
• Personal estate below nil-rate band (for inheritance tax purposes)
• Pension sum not breaching the Lifetime Allowance (LTA)
• Existing Scheme sufficiently funded
• Generous spouse benefit on demise
• No intention to remain an expatriate

If it is deemed to be a good idea to move your scheme, it is ESSENTIAL that you do your homework and make sure that the portfolio you are going to be invested in is managed by a reputable firm and that a switch is in YOUR best interest, NOT that of your adviser.

Infinity Solutions Ltd work exclusively with Tilney Bestinvest in the UK. They are an award-winning investment management firm with over £20bn under management and, importantly, FCA regulated. This gives our clients peace of mind that their investments are in good hands.

If you’d like a review of your pension scheme with a UK-qualified IFA, whether it be in the UK or already transferred overseas, please drop me an e-mail at sbarrie@infinitysolutions.com.

Sam Barrie

Sam Barrie

Posted on February 03, 2017 in Retirement Planning.