Over the years, but far more regularly lately we’ve come across many people who have been sold a “pup” by slick overseas advisers and moved their UK pensions to Malta or Gibraltar whilst living pernamently in Australia or New Zealand.
Advisers from firms like Holborn and Global Eye, fly into NZ and OZ (despite not being regulated in those countries) have meetings and conduct seminars with people their international call centres have targeted on social media and on Linked In. They peddle messages like “avoid losing half your UK pension”, but without context. They scared people with stories of NZ and OZ tax, and said that they would be far better to invest in exotic places like Malta and Gibraltar and saying look, everyone is doing it, so should you!! Well no, you should not, not without looking at all your options including the country you live in.
No fees QROPS – yeah right!
These slick financial advisers say “transfer to Malta and Gibraltar there are no fees on the transfer”. Whilst that might be true in that they did’nt send their clients an actual bill for their services, there most certainly are fees.
Structured products and portfolio bonds…just a tricky way of disguising fees
Most people that have transferred to Malta and Gibraltar are loaded into portfolio bond wrappers run by large companies like Old Mutual (formerly Skandia), Friends Provident and RL360. These platforms allow people to invest in a wide universe of funds. But most importantly for the advisers selling these pups, they are allowed them rip out large upfront fees, usually between 7%-10% of the amount invested. These platforms then ‘amortise’ these fees over the next 7 years. That’s just a fancy way of saying that they hide them on the statements they send to clients and why so many people are surprised by the exit fees when they go to transfer out of their Malta and Gibraltar based schemes.
Bad investments to boot
What’s more is the investments were often of a very poor quality, with lots of people being directed into student accommodation funds, like Mansion. These investments were usually sold by the financial advisers as the funds would give them another bonus for any investments into those funds.
The situation is so bad, Maltese regulators are finally tightening up their regulations and requiring that ALL fees be disclosed and that the amount of any portfolio that can be invested in structured products is limited to 25% of the investment value.
Bad investments usually remain just that
People may be tempted to hold onto their QROPS in Malta and Gibraltar because the high exit fees scare them. But that’s simply no good reason for holding on to them. The best way to illustrate this is looking at a specific example that we have recently been dealing with.
Ralph transferred £164,500 into a Gibraltar QROPS in 2013. At the point of transferring Ralphs Gibraltar scheme paid his adviser 8% of the funds transferred (without telling Ralph). Over the next eight years this fee is taken out of Ralph’s funds at 0.25% a quarter from the original transferred balanced. This way Ralph’s funds get death by a thousand cuts.
Since investing his £164,500 in Gibraltar five years ago Ralph’s funds have grown to, opps we meant shrunk to £153,500. If Ralph had transferred to a standard New Zealand QROPS scheme and invested in a simple balanced portfolio, after fees and taxesRalph would have earned 7.04% a year on his investments. That means his original investment of £164,500 would have grown to £231,000.
Because Ralph was too worried about the exit and surrender fees he was afraid to transfer out. But the cost of not addressing the issue has cost Ralph much more than the fees. In fact in the period that he did not address the problem he has lost out on around £65,000 of investment gains.
Bad investments are just that bad investments. Ralph is now dealing with what was problem and happier for it. The bright side is that Ralph has also been able to get some New Zealand tax advantage out of the situation, thanks to our help.
So, if you live in Australia or New Zealand and have transferred to a Malta or Gibraltar QROPS talk with us today to discuss what your options look like and how you might be able to stop your pup from turning into a dog.
