As part of its crackdown on pension scams, HM Treasury confirmed on Monday that it will limit the statutory right to transfer pensions but will extend the proposed criteria to include qualified recognised overseas pension schemes (Qrops).
Qrops concern
Several respondents to the HM Treasury consultation specifically highlighted Qrops transfers as a concern for pension scams, a position with which The Qrops Bureau’s David White strongly disagrees.
“There have been many changes to the Qrops rules in recent years and this has resulted in them being on much more of a level playing field with UK registered pension schemes than had been the case in the past,” White told International Adviser.
He cited the curtailing of transfers to jurisdictions that allow earlier-than-permitted access to pension pots and the requirement for schemes to be appropriately regulated in the overseas jurisdiction.
White added that, as “many UK pension schemes now permit a client to cash out their pension under flexible drawdown, scammers would not need to persuade a client to transfer to a Qrops to flexibly access benefits” to then put their cash in unsuitable investments.
“I don’t agree that transfers to Qrops are a concern for pension scams and I welcome the Treasury’s intention to allow legitimate transfers to Qrops,” he said.
Nail in the coffin
James Pearcy-Caldwell, chief executive of Aisa International, views the Treasury report as “simply following on from the tightening of rules linked to pension transfers over the last 18 months”.
“Whilst it targets all transfer activity, it is again clear that the regulatory bodies have Qrops and offshore transfers within their sights as they continue to fail to differentiate between transfers onshore and offshore, being more focused on outcomes,” he told IA.
The reduced risk to consumers is “welcome news” for Pearcy-Caldwell despite concerns that “the proposal will inevitably lead to delays in transfers as trustees seek further due diligence on the advisers and the advice being offered”.
“Clearly there will be a lot fewer advisers able to offer the due diligence and advice required. However, we believe that, in the vast majority of cases, a delay is more welcome than the loss of substantial pension pots to scammers.”
He continued: “Unfortunately, for genuine overseas advisers who lack UK connection or regulations, it is a further nail in the coffin of being able to offer advice on UK pensions.”
All is not well
For Geraint Davies, managing director of Montfort International, “it is very clear that Treasury has got the message that all is not well with the world of Qrops advice”.
Davies believes that the changes to the definition of a scam “will make it easier to persuade a potential victim that the product or the solution they are looking at has the hallmarks of a scam”, he told IA.
The definition now includes:
- Persuading individuals to transfer their pension savings in order to invest in inappropriate investments; and,
- Where the scammer has misled the individual about the nature of, or risks attached to, purported investment(s) or their appropriateness for that individual investor.
“Advisers have to accept that a Qrops is not always the solution for a migrant or someone with a UK pension living overseas,” Davies added.
“To state that 20,000 pensions have been transferred to a Qrops in a year when there aren’t even 100 advisers in the world capable of delivering this high-tech advice delivers a powerful message to those advisers who are in this market, that to do this job properly needs serious expertise and not a few days training and the most basic of training.
“Let’s hope the consumers out there get the message,” Davies said.
Bona fide transfers
John Batty, technical sales manager at Boal & Co, told IA that the changes “will fit well with the government’s intention to ensure transfers are made for bona fide reasons”.
He cited the considerable tightening of Qrops rules in recent years and the changes announced in the Spring Budget in March, “particularly the requirement for the Qrops to be regulated, and the requirement for the member to be resident in the same area as the Qrops”.
“We welcome the UK Government’s commitment to include Qrops in the category for a statutory right to transfer.”
