FCA launch anti-Pension Scams and Unregulated Illiquid Investments crackdown

scams unregulated illiquid investments

A recent article in the FT Adviser covered concerns about pension scams and unregulated illiquid investments as a result of pension transfer advice that originated in the UK.

This is something that we, at Tailormade Pensions, have been aware of for some time and it is finally being picked up by the FCA , which has opened 85 investigations this year into scams where UK FCA registered firms are complicit in transferring final salary or DB pension schemes away from the UK into the “safety” of QROPS or International SIPPs.

It involves advice from the UK adviser to enable the transfers for overseas firms to scam pension funds or place funds into unregulated illiquid investments.

Why do scams sell unregulated illiquid investments?

The unregulated illiquid investments often pay large hidden commission to unregulated advisers or, worse, the purported guarantees or investments simply do not exist. What facilitates this?

Well, it is the ubiquitous two adviser model that has been exploited. The FCA rules insist that any safeguarded pension (a pension with guarantees, including DB pensions ) transfer advice, that has a fund or transfer value of over £30,000, can only be advised on by a UK FCA regulated pension transfer specialist.

Often, the UK adviser provides an advice report that is arranged by an offshore adviser who does not have the qualifications or licences for this type of advice. The potential client is sold the idea of a transfer and is often then told what the funds will be and where the money will be moved to. This is before any regulated advice has been given.

The UK adviser often has no contact with the client, and merely produces a report that either-

1. Recommends a transfer but then does not provide detail or comment on the ultimate investments or disclose the fees and risks of such products- usually outside of the UK, or

  1. Advises the client to stay in the DB pension scheme. However, the client is then coached to be an ‘insistent client’ by the offshore adviser. The UK firm confirms to the ceding provider that advice has been given, without mentioning the advice is to stay, and the clients’ funds are moved. This is how these scams end up in unregulated illiquid investments- resulting in substantial losses and destroyed retirement prospects.What Can The FCA Do?

As the article states, the FCA is often powerless to stop these pension scams and the subsequent sale of unregulated illiquid investments. However, the FCA may be able to act on the advice by the UK adviser if the adviser breached FCA rules- failing to advise on the intended investments and their suitability.

Unfortunately, this two adviser model is still very much part of advice given to expats and those outside of the UK with British pensions.


If a non-UK adviser recommends a UK adviser to provide a report for a pension transfer, tread carefully. Make sure you speak to the UK adviser and make sure you pin them down to a recommendation that is specific to you and your circumstances and make sure the UK adviser is aware of where the investments are likely to go. Then, get the UK adviser to confirm that the investments and the advice are suitable and get it in writing- If you don’t, you may have little to no recourse to the UK regulator is things go awry later.

Finally, if a qualified and regulated UK pension transfer specialist recommends that you remain in the pension scheme you should ask yourself why the offshore adviser is keen that you ignore this advice.

The answer is obvious- Commission!


The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was republished on 8th October 2020


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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