Cold calling about UK pensions is against the law
For years the FMA New Zealands regulator have been building a strong regulatory regime to protect people from bad advice and making ill informed investments. One of the first principles in this protection is a ban on cold calls for financial advice.
A second principle is giving a fair, balanced and impartial view in all advice.
So, if your cold caller is telling you to transfer your UK pension before your tax bill gets too big, that seems to violate both of those principles.
What’s worse is some of these advisers are calling from overseas, where they are not even allowed to advise you on New Zealand investments, but they just conveniently ignore that.
Cold callers only sell panic and fear
Most people don’t know financial advisers need to be registered in New Zealand to provide advice on New Zealand investments, and foreign ‘pension transfer specialists’ just ignore it. Many ‘pension transfer specialists’ are based in the Middle East or Asia, or have big call centres based there to set up appointments for their advisers. They use various scare tactics to set these meetings up saying things like:
- Your NZ tax bill will be higher if your don’t transfer immediately
- Schemes in the UK are failing, don’t get stuck there
- Everyone is transferring out of their final salary scheme pensions
Many end up putting people in bad investments
In the past these off shore advisers have pushed investors into pension schemes in Malta or Gibraltar, now they are using UK SIPPs. They will use high-end sounding investment vehicles like portfolio bond and Insurance wrappers, and tell you there are no fees to pay on the transfers.
And because they are not licenced they don’t tell you the important things like:
- The portfolio bond wrappers allow them to disguise up to 15% of the investment value being paid to them as upfront fees
- Bad investments (like student accommodation funds) and have lost significant 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 clients want to get out within the first seven to ten years of being in the scheme.
The intricacies of whether to move or leave a UK pension can only be assessed in light of many more factors than simply tax on a transfer or a vague warning about losing your funds. In fact, responding to these cold calls and transferring in these circumstances is likely to leave you frustrated and poorer.
What to 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.
To determine if you are dealing with a reputable and experienced company or adviser 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 is not allowed in NZ
- Is the adviser local or based off shore? – Off shore advisers are not allowed to advise on pension transfers to NZ residents
Having ruled out off shore advisers and service providers
- What schemes and funds can they offer – Can you 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 professional and comprehensive written advice
- Will you be receiving tax advice from the adviser – taxation on pension transfers is complex and can be a large determinant of if and when 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?
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 more.
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