In an interview with International Adviser, Global QROPS founder Paul Davies said advisory firms around the world will be surprised to find they can no longer process a transfer request into a qualifying recognised overseas pension scheme (QROPS), or other defined contribution schemes, without a specialist qualification.
On Monday, the Financial Conduct Authority issued the details of a new rule, which clarified that pension transfers from defined benefit schemes over £30,000 must now be checked by an adviser with a pension transfer qualification. The body also tripled its estimate of how many UK advisers are expected to need the specialist qualification.
“Firms specialising in QROPS will be aware of the change,” said Davies. “But regular advisory firms that are advising UK expats may not realise they won’t be able to go ahead with a transfer.
“Some will try to process the transfer and find out they don’t have the right permissions, which can happen at quite a late stage of the advice process.”
“Unless they can affiliate themselves with a UK-based advisory firm then some may step out of the QROPS market and their clients might have to go elsewhere”
Davies said the new rule could pose a problem for non-UK advisers who will now need to form links with an FCA-regulated adviser: “Unless they can affiliate themselves with an FCA-regulated advisory firm then some may step out of the QROPS market and their clients might have to go elsewhere.”
However, managing director of Guernsey-based Concept Group, Roger Berry, argued that – while the industry might have slowed down temporarily as people work out what they are going to do –advisers won’t be stopped from transferring defined benefit (DB) schemes, as firms will either have a UK office they can turn to, or will tie up with an FCA-regulated adviser.
He said: “The rules are definitely tougher for advisers and brokers, but the change is a positive result for the clients.
“While some offshore advisory firms will no doubt offer an in-house defined benefits transfer solution, there is the potential for conflict where an offshore broker is supposed to be impartial on giving the transfer advice.”
Berry said one model Concept offers is to outsource transfer advice to an FCA-regulated pension transfer expert, who is not only independent of the company as a product provider, but also the offshore adviser. This, he said, is a model with less conflicts where clients want to move from DB schemes into a QROPS.
“Our position as a product provider is we don’t want anything to do with the transfer advice,” he said. “If the expert thinks the transfer is suitable and the client is happy, then they move the money into the QROPS and then hand the client back to the offshore broker.”
Berry said, however, that while the rule change is good news for clients from a protection perspective and will create a more robust advice process, it’s likely to increase the cost of advice.
“In whatever way the market develops, the old days of seeing pro forma DB transfer advice for low cost have probably passed, and for the better,” he said. “That is, I believe, the net effect of the FCA changes.”
