However, unlike OMI Batty believes Rops are still an appropriate product for protecting UK expats from paying the death tax – considering the average life expectancy for Brits is 81.3 years.
“The change in death tax has been perceived to reduce the benefit on death, even though the vast majority of retirees live past age 75 so there will still be some tax liability for the beneficiaries,” he said.
The pension freedoms have made it harder to sell Rops as a product, admits Batty.
“It’s no longer as simple as “transfer to a Rops and avoid 55% death tax” anymore. A more professional and technical sale is now required, meaning that only the more professional IFA firms are able to write this sort of business,” he explained.
FCA rules
Another matter dampening Rops sales is the Financial Conduct Authority’s (FCA) requirement that all consumers, including those living outside the UK, must take regulated financial advice for all transfers out of final salary or ‘guaranteed’ pension schemes for pots over £30,000 ($39,631, €35,126).
“One thing that OMI haven’t mentioned is the relatively new requirement to obtain FCA advice on a transfer from a final salary scheme, which is by definition difficult for a non-resident of the UK, means it’s more difficult to sell a transfer from a final salary scheme,” said Batty.
OMI said it expects demand from final salary scheme members to increase as the “fall in interest rates and gilt yields” raise doubts on the long terms sustainability of some final salary pension schemes.
