Transferring a final salary pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) may become a lot easier for expats.
The Financial Conduct Authority, the watchdog that sets the rules for financial advisers and providers, wants to investigate whether the present guidance still works.
The set of checks and balances to compensate retirement savers claiming they had lost financially from a transfer out of a final salary scheme into a direct contribution pension was last looked at more close to two decades ago.
The main aim was to put final salary retirement savers back into the same position they were in had they remained in their pension plan.
The FCA feels the rules no longer accomplish this and wants to consult with financial advisers later in the year to find out what they think.
Settlements put on hold
Meanwhile, the watchdog does not want advisers to reach a full and final settlement with a retirement saver who has complained until the results of the consultation are known.
Advisers can offer provisional redress as long as they make clear that the case will be reviewed after the consultation. The results are expected to be available in the spring of 2017.
Transfers out of final salary schemes to direct contribution pensions are generally frowned on by the FCA.
A final salary scheme offers a guaranteed retirement income based on salary and length of service and often other benefits, such as enhanced annuity rates.
Direct contribution pensions pay a retirement income based on the value of the fund, which can rise and fall in line with stock market performance and comes with no guarantees.
Cautious advisers scared of claims
If the consultation eases transfers for expats from final salary pensions to QROPS, more advisers are likely to enter the market as their caution about clients claiming compensation if their pension fails to perform as planned is likely to be tempered.
Recent pension developments, such as the British Home Stores scheme going into the Pension Protection Fund can reduce the value of final salary schemes and make QROPS returns more competitive.
This is thought to be one of the reasons behind reviewing compensation procedures as many retirement savers in final salary schemes do not transfer even though doing so may turn out financially better.