Retirement savers contemplating switching their UK defined benefit pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) only have a few days left to transfer the money without consulting an IFA.
New pension transfer rules come in from April 6, 2015 that require all defined benefit pension transfers to a QROPS for funds of £30,000 or more must be checked by a professional pension adviser.
The adviser must be authorised to give pension or investment advice by the Financial Conduct Authority (FCA).
The measure will also apply to any pension that has a guaranteed annuity rate.
The new rules mean expats or international workers with UK pension rights making a transfer to a QROPS need two tiers of advice from April 6.
Taking responsibility
First, an overseas pension adviser will need to give QROPS advice, then a UK authorised adviser will have to check that advice and rubber-stamp the recommendation to transfer the fund.
Some UK advisory firms will have both experts in-house.
The retirement saver will not need to discuss the transfer with the UK adviser, but the case will have to go to one for checking.
Under FCA rules, the UK adviser takes on liability for giving the investment advice.
So far, according to research by financial firm Old Mutual, 30% of offshore QROPS advisers have linked with a UK IFA, 57% are still considering their options and 8% are waiting to see if HMRC exempts offshore advisers from the new rules.
New relationships
The FCA explained the tightening up of who gives advice to QROPS savers will protect investors who may lose benefits when switching out of a direct benefit scheme.
Old Mutual says the coming months is likely to see a flood of tie-ups between overseas and UK financial advisers as offshore IFAs will be stopped from advising direct benefits clients without input from a UK firm.
“This means retirement savers thinking about switching out of direct benefit pensions or those with guaranteed annuities need to make sure their QROPS adviser has the back-up they need from a UK firm before making any transfer,” said a spokesman.
“Some firms have international and UK offices or associated firms so will easily be able to make the change, but others will have to forge new relationships.”
The spokesman also explained that the new rules could add an extra layer of costs to setting up a new QROPS for retirement savers.
