The Gibraltar Financial Services Commission (FSC) has proposed directly regulating the operation of personal pension schemes and the provision of financial advice.
Under the proposals, scheme operators would be required to carry out due diligence on financial advisers in other jurisdictions, due diligence on the assets such advisers allow into schemes, and would have responsibility for the acceptance of non-advised business.
Scheme operators would also take responsibility for an assessment of the suitability of high-risk and speculative investments for retail investors made by overseas financial advisers.
The regulator said the operator must ensure that products such as unregulated collective investment schemes are only be recommended by financial advisers to high net worth individuals who have the capacity for loss.
However, it said it accepts that operators may have trouble verifying every customer’s risk class, so suggested they obtain written confirmation and evidence from a financial adviser that the client has been formally assessed as a sophisticated investor or high net worth individual, who can invest in non-standard investments.
The FSC said the regulated operation of personal pension schemes will facilitate self-contained regulation, better accommodate a wider variety of scheme structures, and ensure that the reputation of Gibraltar is enhanced.
The regulator confirmed that it is “of the view” that only the operator of a scheme needs to be licenced rather than each individual scheme.
Six week period
Currently, personal pension schemes in Gibraltar are structured on a trust basis. While the Financial Services (Investing and Fiduciary Services) Act 1989 ensured that trusteeship is a licenced activity, scheme holders are currently at risk of the actions of other parties such as pension scheme administrators and financial advisers.
The consultation covers personal pensions for Gibraltar residents, QROPS, Qualifying Non-UK Pension Schemes; and international pension transfers from countries other than the UK. It is now open to a six week consultation period ending on 14 July.
Albert Isola, minister for financial services and gaming at the FSC, said: “This is an opportunity to further develop the pensions market in Gibraltar, and, as with everything we do, it is important that we strike the right balance between effective regulation and remaining a jurisdiction which is open for business and welcoming of quality operators and innovation in this field.”
Samantha Barrass, chief executive officer, said: “the FSC is committed to supporting the development of the framework for pensions to ensure consumer protection and safeguard the reputation of Gibraltar as a financial services centre.”
Gerry Kelly, Group Finance Director at Sovereign Trust (Gibraltar), said: “Sovereign welcomes the proposed enhancement to the existing legislation. It will ensure that common standards are applied by all trustees, administrators and advisers.”
“Long time coming”
Gary Boal, managing director at Boal & Co, said: “The consultation has been a long time coming, but what was most important was not speed but that it was in the end properly researched and written from the point of view of pension schemes as opposed to other trusts.
“It is pleasing to see the FSC recognise that pension administrators are a core part of the regulatory equation, that it is not appropriate just to narrow their focus on trustees.
“In some cases, it is the administrator who is the provider or operator of the scheme, rather than the trustee, and it is the administrator who has much of the powers in relation to the scheme. It is good to see this recognised in writing for the first time.”
He added that, while several proposals will need careful consideration, the company welcomes the document.
The GSFC said the future growth of the QROPS market in Gibraltar is dependent on HM Revenue & Customs’ upcoming decisions on the introduction of full flexibility to non-UK pensions.
In December, the Revenue announced that it would introduce full-flexibility to non-EU QROPS on 6 April, removing the requirement for 70% of the funds in a scheme to provide an income for life.
However, in March, it backtracked on this decision, saying that the 70% requirement would remain “temporarily”. It has yet to announce when or if the rule will be changed.
