This added complication has to do with whether IFAs with UK-resident clients should be discussing QROPS with them, if they are to be considered “whole of market” advisers.
This is in spite of the fact that conventional wisdom, at least, in the industry holds that UK pensions may not be transferred into a QROPS (qualifying recognised overseas pension scheme) unless the individual is either living overseas or plans to, and once gone, does not plan to return to the UK.
Under the rules governing the way UK advisers are allowed to advertise themselves, those wishing to call themselves “independent” financial advisers, or true IFAs, are obliged to offer their clients a choice of investment options from the full range of market options available.
If they cannot, they must call themselves “restricted”, and explain clearly to their clients which areas they may and may not advise on.
Ombudsman case, FCA rumours
Advisers and QROPS specialists cite a number of reasons for their confusion on the QROPS-advice-in-the-UK question. They include a market rumour, which cannot be confirmed, that the UK’s Financial Ombudsman Service has issued a preliminary, “adjudicator” ruling against an unnamed adviser for – it is said – failing to advise a client on his or her options for transferring one or more pensions into an overseas scheme.
A spokesperson for the FOS said the service could not say whether such a ruling had been made until a final decision in the case had been arrived at.
“If both the consumer and the business accept the adjudicator’s findings, then the complaint is then settled,” the spokesperson added. “But if the matter remains unresolved, either party may ask for a final decision by an ombudsman. The ombudsman will carry out an independent review of the complaint before making a final decision.”
Another reason for the growing confusion is another market rumour, which holds that the Financial Conduct Authority is currently considering whether to introduce regulations covering the giving of advice on QROP schemes, the way it regulates UK pensions advice generally. It is thought that QROPS, introduced in 2006, have remained an unregulated product until now because they were aimed at the offshore market, but some observers say this lack of regulation is one reason that many individuals are being sold QROPS that are not well suited to their needs.
For now, sources say, no formal documentation on the reported FCA plan to regulate QROPS sales and marketing is known to exist. Nevertheless, the rumour that the matter is under discussion, coupled with the report of the FOS ruling, and the long-standing claims of some industry players that it is entirely permissible to sell QROPS to UK-resident individuals, are said to be contributing to making the business of discussing pensions with clients a more daunting prospect for many UK financial advisers than ever before.
“For UK advisers going forward, advising on pensions might have just become a lot more complicated,” said Bethell Codrington, global head of TMF International Pension Solutions, and chairman of the Malta Association of Retirement Scheme Practitioners.
“And it will become even more complicated next year, when the new pension regulations come into force.”
“Clients need to understand the issues and why it’s not just case of transfer immediately to a QROPS and or hold off – clients need solutions that work," adds Geraint Davies, managing director of Montfort International, a UK financial planner which specialises in QROPS advice.
"This is about the interaction of tax, visas, pensions, regulatory concerns, currency, etc. Advisers have to deliver advice and guide clients, yet if you look at all the training manuals and courses and examinations, there is no semblance of guidance or training in place."
Codrington is among those QROPS experts who argue that in spite of widespread, ostensibly official, information to the contrary, HM Revenue & Customs in fact does not object when UK pension scheme members who reside in the UK and have “no intention of residing overseas” transfer their pensions into a QROP scheme.
“It was reported that at a meeting of the Association of Member-directed Pension Schemes in November 2013, HMRC confirmed that, in order to comply with the European Fundamental Freedoms of movement [rules], this was a feature built into the design of QROPS,” Codrington said.
The problem for UK advisers, he thinks, is that they may be in danger of “leaving themselves open to being censured” if they fail to give “all the advice available to their clients” by failing to mention QROPS.
“If I were a UK adviser who felt he didn’t know enough about QROPS to give advice, I would add a qualification to my recommendations letter, in which I’d state that I don’t advise on QROPs, just to be safe.”
Like others interviewed, Codrington said he believes that the government regulators should give more guidance to advisers and the industry on QROPS than they do.
He also stressed that clients should get independent, qualified advice from a suitably-regulated individual from a reputable and fully-regulated company, particularly UK residents who are being offered pension products by non-UK providers.
Asked whether it was permissible for QROPS schemes to be sold to UK resident individuals individuals who did not intend to leave the UK for good, an HMRC spokesperson said: "the [QROPS] regime "is intended to enable people to take their pension savings with them when they leave the UK".
He also referred to an HMRC document entitled Purpose of the QROPS regime, and to a link on HMRC's website, to a Registered Pension Schemes Manual, with additional information on QROP schemes.
See International Adviser tomorrow for an analysis on the future of QROPS advice by James Caldwell, managing director of Aisa Professional Chartered Financial Planners, and Christopher Lean, a Czech Republic-based adviser with OpesFidelio, Aisa’s recently-formed overseas network arm.
