UK pensions legislation has gone through many changes in the last few years, with significant changes introduced through the pension simplification rules in April 2006. The so called simplification rules introduced levels of complexity where specialist knowledge on pensions is required for example if someone was entitled to greater than 25% of the fund as a tax free lump sum a transfer to a SIPP or a QROPS could lead to this being lost, these are aspects that clients are entitled to receive the right advice on.
The implications of the recent announcement by the coalition government that the lifetime allowance is to be reduced to £1.5m from April 2012 is another good example where some British Expats need to be able to rely on the advice that they receive to ensure that they minimize the tax implications on their pension fund, although, this doesn’t necessarily mean transferring to a QROPS.
It is hard to keep up to date with all the changes to legislation but if we are to provide the right advice it is imperative that as advisers we keep our knowledge up to date and always provide advice that is in the best interests of the client rather than advice which is in the best interest of the adviser through the level of commission which will be generated.
The only way I can see that some of the advice being given can be monitored is by the SIPP and QROPS providers taking more responsibility for the type of business that they accept from the offshore market, this in the long run will benefit their businesses as well as it surely will lead to a higher retention rate.
I know that there are some providers who operate in the UAE that will “vet” applications to see that the advice is suitable and therefore whether they are happy to accept the business but it would help if all providers do this, particularly in the QROPS market.
I struggle to understand how some QROPS providers are willing to accept a significant cash equivalent transfer value from a final salary scheme without an adviser carrying out a transfer value analysis. I appreciate that it is not the QROPS providers responsibility and they are just a bi-product of advice given but if we are to ensure the reputation of financial advice given in the UAE and the offshore market shouldn’t both providers and advisers be working together to raise the professional and moral standards?
It worries me the pensions advice that is being given, some of the things that clients tell me that they were previously told by other unscrupulous advisers is seriously concerning, the worst case of bad advice I have come across to date is that a client was told that it was important to place an offshore bond within a SIPP so that a) the underlying funds would not be subject to UK capital gains and income tax and b) if they were to return to the UK they could draw income of 5% from the bond through the pension tax free.
I am sure many of you reading this will agree with me this is seriously worrying, the cynic in me would say that the only real reason that the offshore bond was placed in the SIPP was for the adviser to get more commission.
It is hard in a global market for all advice relating to UK pensions to be controlled, however, ultimately the responsibility of ensuring that the advice given is suitable rests with the adviser and the company that they represent. In my opinion more should be done by the advisory offshore companies to ensure that their advisers have the right level of knowledge to deliver advice to clients on the options relating to their UK pensions.
