US QROPS Sign Off – if you hold a bond should you complain?

Defined Benefit complaints- What is a Sign Off?

Since the UK introduced ‘Pensions Freedoms’ in April 2015, it has been a requirement for UK pensions with ‘Safeguarded Benefits’ to be signed off by a UK Financial Adviser with the specialist pension qualifications before the trustees of a pension scheme will allow a transfer to another pension, in or outside the UK.

The UK adviser is ‘Signing Off’ the UK pension to state that the pension has been assessed and that the pension holder has been advised of the ‘safeguards’ that they are giving up. Only a licensed and qualified UK financial adviser authorized and registered with the Financial Conduct Authority (FCA) in the UK can do this.


US QROPS Sign Off – should you complain?

Probably, yes! Any transfer of a british pension to a QROPS, especially in Malta, is likely to involve an insurance bond, commission and hidden charges. Tax wise it is unlikely to be suitable.


What has been happening?

It seems that there are FCA authorized Financial Advisers that have been ‘Signing Off‘ for non-UK regulated advisers. From what we understand, the problem with this is that when these UK Financial Advisers are completing their analysis, they do so without taking into account essential factors such as the personal circumstances of the client, the full charges in the plan and the pension funds are being moved to.

In other words, the report that is provided by the UK firm is unlikely to provide a realistic picture of what will happen at retirement or the viability of the alternative pension plan being proposed. This report is then utilized by an overseas company that may or may not be regulated in an overseas territory with claims that the UK approves the transfer. However, often at that point a further report is provided with additional and perhaps conflicting information which then may include further charges that the UK report has not taken into account.


The FCA Position

The FCA has provided multiple warnings on its website about scams involving QROPS which are not specific to any one country; they do not cite any particular company. There are scam alerts in many journals, and numerous places on the web that often cite QROPS as being used by unscrupulous advisers in general. The FCA warns UK regulated advisers of the danger of ‘Signing Off’, and in January 2017, released a notice about this matter suggesting that it is watching closely due to multiple complaints and scams being reported. Again this is not country or company specific, and there is no specific reference to which company and specific complaints.

The FCA has also warned UK advisers not to use a third-party final salary transfer specialist to sign off, where they have not carried out a full and appropriate analysis of the UK pension. Again this is generic and not linked to any specific company complaints, although you can find which companies by going onto the FOS website. What should be happening is the report should include the correct structure that the QROPS it will be transferred to, the full charges, correct risk, as well as the correct underlying investment vehicle and investment funds being recommended.

Indeed, the FCA has stressed that UK pension transfer specialists must also take into account the client’s investments post-transfer. The risk of fraud, failed funds and poverty in retirement are all too real if people give up guaranteed pension benefits on the nod of a Financial Adviser that does not care where the funds move to. See here

The Latest Development

The FOS website lists specific complaints and also the Financial Conduct Authority may issue Section 166 order on UK regulated entities. The Section 166 is a serious move on the part of the FCA so the industry and clients should be watching any developments regarding this.

This follows recent articles about FCA being pressured to act on overseas pension transfers overseas pension transfers

US QROPS complaints

There have been some US QROPs complaints recently linked to the moving of UK pensions to QROPS in Malta, but again, we are unaware of the outcome. We were asked by one client to assist with several US QROPs complaints but we declined as this is outside of our expertise. However, of the US QROPs complaints we saw, we were able to assist one client in cancelling the underlying investment bond with commission on it being paid outside of the US border within the 30 day cooling off period and redo the pension transfer analysis. This client was extremely satisfied with the outcome.

End of us QROPS sign off with UK firms?

We cannot say this as it is too early to understand what the outcome will be. Whilst it may not be the end of US QROPs sign off’s, it certainly puts a stall on some firms current ability to process QROPS. This is big business for some UK firms and so it is likely they will find a way to continue with their business model.

It is well known that other Offshore Financial Adviser firms have a UK regulated arm that have a similar process and it will be interesting to see what the FCA does next. There are many action groups against many companies, and certainly pension funds that end up in QROPs, with Offshore investment bonds and inappropriate investment funds can ultimately cost the pension holder dearly.

What Should be happening with pension transfer recommendations?

  • The UK Specialist Financial Adviser should carry out the comparative analysis of the UK pension with ‘Safeguarded Benefits’ and the proposed pension structure, taking in to account the charges that are in the proposed structure, the investment vehicle and the investment fund risk and charges.
  • This produces a ‘Critical Yield’, which should be assessed in conjunction with the investors’ attitude to risk and any other relevant factors.
  • Thus, the first part can only be done in conjunction with the second part to obtain the correct outcome and the same adviser in the same firm should be doing both. Where there is a disconnect between the two, the investor is likely to encounter difficulties and lose ability to hold anyone to account, and lost protections and possibly money!


It seems that the FCA are unhappy when the local Financial Adviser that is assisting the pension holder, after the UK Financial Adviser has ’Signed Off‘ the UK pension, is a not a UK registered and authorized Financial Adviser and is then the local adviser is providing a “second” report or cover sheet with the actual details making the initial UK signed off report practically worthless.

The reason for this is that after the UK pension has been ’Signed Off‘ by the UK Financial Adviser, the pension holders pension funds are being placed in to structures and investment funds that are leading to these individuals losing money and experiencing poor outcomes.

In essence, companies and advisers, even where they share the same name, are only liable for that part of the advice in their own country. Let us say you have a group called “Adviser Professional”. As an example, and what the FCA are saying through their s166 is, if the business is transacted through Adviser Professional in Country A, but a report is signed off from a different Adviser Professional in country B, then if the client becomes dis-satisfied they are usually unable to take action against Adviser Professional in country B; no Adviser Professional complaint is logged in either country and no responsibility for the advice is accepted in either country. There is no suggestion that there is anything illegal in this practice, as it works within the legal framework that is allowed. The FCA will have to make a judgement.

Article dated: 14 November 2016
For further information on what you should be asking for from all advisers and their companies, here

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 except 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.

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