Blocked UK Pension Transfers - What Next?
Does the expat financial advisor firm you're working with have both a MiFID and a pensions licence? Thousands of expats have money purchase pensions in the UK, and more than ever are being told by their pension provider to transfer to other schemes. The reasons, often as a result of Brexit, can include not being able to access to capital or even allowing fund switches, potentially leaving the member without capital and the scheme at risk of underperformance.
Many pension schemes don’t see being an expat as an issue but what this means for those who are told to transfer, is that they can’t go online and switch between schemes themselves as they could in the UK, as usually only UK residents can open a new UK pension scheme.
What Can Be Done?
This scenario puts expats in the difficult position of either leaving their scheme unmanaged and not accessible (not an option unless repatriating), or paying for pension transfer advice from a regulated firm. In addition to the expense, this can create further obstacles as finding advisors with the correct licenses to ensure you of the best possible advice and investor protection can be difficult to find, making it vital you are thorough when doing your due-diligence on possible firms.
We are also seeing expats being told to transfer out by their provider, and after seeking advice, the same schemes then cause further delays at the point of transfer by requesting additional information that needs to be provided before moving forward. Whilst we encourage some of these requests, such as Moneyhelper, Pension Wise meetings and due-diligence calls, your existing scheme not having knowledge of the overseas pension market can result in the transfer being blocked, leaving you without access and your advisor doing a lot of work for nothing.
What Ceding Schemes Want to See
If a UK provider requests a due-diligence call, it will be to confirm you understand differences between the regulatory protection you would receive in the UK, and that offered (if you are in Europe for example) by MiFID (Markets in Financial Instruments Directive), the regulatory regime required to operate under. Again, we encourage these steps and this is information that should be provided in your advisor's investment suitability report. However, requests by your ceding scheme can often be misleading and prevent transfers.
If you are transferring to an ‘international SIPP’, the word ‘international’ often raises red flags in the UK and classifies it as an overseas pension. However, an ‘international SIPP’ is actually a UK SIPP that adheres to all of the standards your existing scheme does. Any differences are usually useful, including the ability to invest in currencies other than sterling, and a client support team that understands the needs of expats with pensions. Once explained, your scheme may be satisfied and remove any flags.
Other obstacles include underlying investments also being classed as ‘overseas’. Funds may be domiciled in Luxembourg, a respected and well-established fund jurisdiction and since Brexit, ‘overseas' could also include Ireland, a leading investment centres for low-cost ETF’s created by the same institutions that your existing scheme will probably be using in the UK. Again, existing scheme may approve your transfer when evidence is provided.
Always Use The Right Advisor
Importantly, UK schemes are increasingly checking the pedigree of financial advisory firms providing the advice. Most firms advising expats in Europe should be regulated by MiFID, allowing passporting of advice across the EU which is usually issued by one country’s regulator. Remember that MiFID does not cover pensions, so in addition to UK schemes wanting to see a copy of your advisor's suitability report, they may require evidence of a pension licence in the ‘home’ state where the MiFID licence was issued.
The majority of expat firms lack this license so when considering a pension transfer, be sure to engage with an advisor that can evidence the necessary credentials to give you both the best levels of investor protection, and every chance of a successful transfer. We also believe expats prefer to work with firms able to demonstrate their expertise by getting authorised to give pension advice in their home state.
Request a Free Consultation
If you would like guidance on transferring your pension with a firm possessing both MiFID and pension licences, and the credentials to give you the best possible levels of advice and protection, get in touch today and we’ll be happy to help.