Gibraltar Qualifying Recognised Overseas Pension Schemes (QROPS) are likely to face tougher regulation.
The Gibraltar Financial Services Commission wants providers in the offshore financial centre to police the advice given by financial advisers from outside the territory and to assess the investment risk of consumers.
The regulator is concerned that some QROPS investors opt into unregulated collective investment schemes (UCIS) that are not suitable for their level of experience as an investor and that they cannot afford to stand any losses of the UCIS should fail.
The regulator wants to follow the British standard set by the Financial Conduct Authority which bans financial advisers from recommending UCIS to ‘unsophisticated’ investors who are lured by potential high returns but could lose all their pension funds to the risky ventures.
Building credibility and reputation
To monitor the level of risk assessment and advice offered by financial advisers from outside Gibraltar, providers will ask IFAs to hand over a report explaining why they chose a specific QROPS and the underlying investments.
Gibraltar is taking action to give more credibility to the QROPS offered by providers based on the Rock because although the territory is within geographic Europe, it is not a member of the European Union.
Earlier this year, the British government decreed that pension flexibility would not cover QROPS outside the European Union, putting some financial centres at an immediate disadvantage to those that can offer spend as you like drawdown to anyone aged 55 or over.
Instead, non-EU QROPS must ring fence 70% of any tax-relieved contributions transferred in to preserve as a fund paying pension benefits to retirement savers.
The Gibraltar decision to widen QROPS monitoring also applies to other offshore pensions is under consultation until July 14, 2015.
The full consultation documents are available here
Eyeing bigger fish
Gibraltar’s financial services minister Albert Isola said: “The government wants the pensions market to grow in Gibraltar and we see this consultation as an important step.
“Our aim is to promote business while maintaining a safe and regulated environment for pension savers and their investments.
“Improving our regulatory framework is one way of doing that.”
The consultation notes explains that Gibraltar is the base for 44 QROPS providers, four Qualifying non-UK Pension Schemes (QNUPS) and nine other pensions, which are all trust based.
One consideration is whether non-trust based pensions, such as those in France, other European countries and possibly as far afield as the USA would consider moving to the territory if the tax regime and regulation were suitable.
