For years the Australian and New Zealand regulators have been building strong regulatory regimes aimed at protecting people living in their countries from bad investments. The central plank of regulations in Australia and New Zealand is that you must be regulated in those countries to provide financial advice to people living in the countries. Seems logical enough right, particularly because then your advice is covered by all the protections afforded by the regulators in Australia and New Zealand. The great thing about New Zealand and Australia is that advisers have to disclose their fees, conflict of interests, the risk of the investments, the total fees of the investments and much more.
All this means that investors can make excellent choices about their investments, and while it does not stop people making bad investment decisions it certainly eliminates the selling of inherently bad investments.
What’s not known is that the regulatory regimes extend to any investment advice provided to someone living in New Zealand or Australia. Therefore if someone is providing a New Zealand based person advice on their UK pension they need to be registered in New Zealand.
The sharks circle the waters – looking for unsuspecting prey
Because most people don’t know that advisers need to be registered in New Zealand or Australia to provide advice, they are often duped by foreign ‘pension transfer specialists’ who claim that they can help protect their UK pensions.
These ‘pension transfer specialists’ are usually based in the Middle East or Asia and have sophisticated websites with multiple offices, they will also fly regularly into Australia or New Zealand for client meetings. In the past they have pushed investors into investments in Malta or Gibraltar. These investments will have been into high-end sounding portfolio bond wrappers, with a promise of no direct fees to pay on the transfers.
The advisers have little or no regulations that they need to abide by, that’s why they operate off-shore where the regulatory waters are very murky. If they were licenced in New Zealand or Australia, they would have had to disclose to their clients, things like:
- The portfolio bond wrappers allow them to disguise up to 15% of the investment value being taken out as upfront fees
- Investments that are rotten and have lost significant amounts of value but are still recorded at cost value by the portfolio bond platform (a number of the investments are worth 60% of the value shown on investors statements)
- Their schemes have massive exit penalties if they want to get out within the first seven years of being in the scheme.
Essentially, these advisers have been scamming New Zealand and Australian residents to line their pockets with fees for years. And, when people have found out what has happened to their investments they have also discovered they have no recourse to compensation.
These sharks have got to people in Australia and New Zealand by having massive outbound calling operations, designed to cold-call people they suspect might have a UK pension. Once in the trap they grift people into the investment vehicles that deliver them massive fees and leave the investors with massive long term pain…giving rise to the term “Pension Scam”
The Financial Markets Authority in New Zealand keeps a list of some of these outfits on their website similarly in Australia.
Brexit and pension failures are fuelling the message of panic
UK pensions scams have bee a hot topic recently especially in light of the failure of the British Steel pension scheme and it’s entry to the Pension Protection Fund (PPF). Many members of this scheme were deemed to be badly advised about what they should do with their funds when given the opportunity to transfer before the scheme went in to the PPF and the court cases and inquiry in to this will drag on for years. Read about it on the BBC Here
Pension scammers take many forms and in many cases they are bona-fide advisers based either in the UK or regions like the Middle east or Asia that offer seemingly very attractive pension transfer options. Unfortunately because of the complexity of many of these offerings and the hidden fees associated with them some people are making bad decisions about transferring their UK pensions. Read The Money Advice Service tips on avoiding pension scammers Here
The most common messages we are seeing online in Google Adwords from unlicensed advisers typically involve the following:
- Transfer your UK pensions and avoid losing up to half of your funds
- Brexit-proof your UK pension
The intricacies of whether to move or leave a UK pension can only be assessed in light of many more factors than simply Brexit or a vague warning about losing your funds. In fact, if anything responding to these ads and transferring in these circumstances is almost guaranteed to lose you half of your funds.
There’s plenty you can do to avoid being burned
Fortunately New Zealand offers a safe and highly regulated environment for transferring your pension with highly reputable schemes with an array of funds to invest in that are very transparent when it comes to fees, that said there are numerous things to beware of when it comes to a pension transfer to any new jurisdiction.
Some of the points below will help you determine if you are dealing with a reputable and experienced company or adviser when considering a pension transfer and you should be asking these questions of yourself and the adviser before engaging the services of any service provider:
- Did you contact the adviser or did they cold call you? – Cold calling for financial advice in OZ and NZ is not allowed
- Is the adviser local or based off shore? – Off shore advisers are not allowed to advise on pension transfers to NZ residents
- Is the adviser registered with the FMA as an Authorised Financial Adviser or with ASCI in Australia? – You can only receive financial advice from such a person
- If you approached the adviser what experience do they have with pension transfers and what scheme will they transfer you to – Are they tied to that scheme in any way, is their advice impartial, are they experienced at pension transfers or is it a sideline, how many have they done in the past year?
- What funds does the scheme they are recommending offer – Can I invest in Sterling denominated finds, what will my tax rate be on my investments, how will I know how and when to declare my transfer?
- Have all fees been disclosed? – There are typically transfer fees and ongoing adviser fees, what are these?
- Will there be Foreign Exchange (FX) fees charged – There should be none over and above Interbank Rates, some schemes charge up to 2%, what will you be charged
- Will you be receiving any written advice regarding the transfer itself – Is it a good idea to transfer or not? Do not transfer simply because someone says it’s a good idea, get proper written advice
- Will you be receiving tax advice from the adviser – taxation on pension transfers is complex and can be a large determinant of the decision to transfer.
- Tax advice on a pension transfer is expensive when undertaken by a 3rd party and should be part of your pension transfer advice and your pension transfer fee – if it’s not why not?
- There is a lot online about pension transfers, much of it out of date and because there are so many important things to consider about a transfer you need to be fully informed before you make a decision to transfer or not – ask the hard questions upfront
- There are some advisers offering to do transfers for free – beware of part time operators doing transfers simply to get your funds under management (and extract their fees without you seeing them do so) – Why is it free, what service will they provide, can they guarantee a timely transfer?
- Timing a transfer is critical when it comes to any tax you might need to pay – when will the transfer arrive, what extra tax will I pay if it’s late or if the currency changes dramatically?
These are just some of the key issues and questions when considering a UK pension transfer and whom ever you are speaking to about your UK pension they should be able to answer all of them and be offering an all inclusive scheme to scheme transfer with fully independent advice on both the transfer an your new receiving scheme and investments in New Zealand.
If you have any issues around your UK pension, or think that you have erroneously transferred your pension out of the UK to some where other than Australia or New Zealand please contact us.