Projected UK pension transfer changes may leave expats open to fraud

Published:  3 Oct at 6 PM
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A UK government measure at present under consideration is likely to leave thousands of expat retirees vulnerable to pension fraud.

The UK is considering easing existing consumer protection laws relating to pension transfers by both onshore and offshore residents. Government claims that changing the law as regards regulations will make it easier for expats wishing to transfer their pension pots offshore aren’t taking into account the risks involved.

However, political awareness that any rule relaxation may leave offshore retirees vulnerable to fraud is unlikely to prevent the change from taking place. At present, all retirees looking to access pension pots worth more than $30,000 and including safeguarded benefits such as guaranteed annuity rates are forced to get advice from an FCA-registered independent financial advisor. Those with final salary pensions valued at the same amount or more are also required to seek advice.

Both expat categories are experiencing difficulties getting the required advice, as FCA registration doesn’t apply outside the UK, and the government is fully aware the requirement to seek advice from UK registered and resident IFAs can cause problems for those retiring overseas. According to a spokesperson from the Department of Work and Pensions, British pensioners living abroad may well have additional and different motivations or circumstances leading to their wish to transfer their pension pots to offshore jurisdiction schemes.

However, pension providers are warning that watered-down regulations as regards advice taken could expose Brit retirees overseas to the types of pension and other financial fraud formerly seen in European and Asian expat hubs. According to one such provider, should overseas pension transfers be able to be made without any advice, unscrupulous, unqualified salesmen would have the freedom to scam unsuspecting pensioners without any redress.

To be fair to the UK government, its request for evidence from providers as to how retirees overseas are coping with the advice requirement and how it can be made more relevant to expat circumstances may be a protective step forward. Information and comments are being requested from the providers themselves through to pension experts, lawyers, IFAs in the UK and overseas and even expat consumer groups and members of pension schemes.
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