Expats – here’s how to solve your pension puzzle
First published 01 November 2016 • Updated 23 January 2017
You used to be a UK resident but now you live abroad. But your pensions are still in the UK. How do you manage and access the money without incurring lots of additional fees and tax – or worse, being ripped off? Alex Norwood of Montfort International answers your expat pension questions.
One of the biggest worries for expats is their financial security. In particular, you’d rather not lose the wealth it has taken you so long to build up, just because of incorrect or inappropriate pension transfer advice.
Without the right advice, you can end up with your retirement savings in high risk investments with no diversification – and you may also have no idea of the excessive charges involved. The worst part is that the advice you may have received comes from unregulated jurisdictions – meaning there is no recourse once reality hits!
Retired expats deserve better than this. We at Montfort have compiled the top questions that every expat should ask before receiving advice or signing any documents. We’ve also included the reason for asking each question.
Q: Where are you regulated and by whom?
This is essential for your protection as a consumer. If you need to complain to someone (e.g. if your investments go wrong because of inappropriate advice) you need someone you can approach to register the complaint, who can then potentially order compensation.
Q: Do you receive any financial incentives (such as commission) for any of the products that you recommend once the pension has transferred? If so, are you able to give me a full schedule of the charges involved?
Ask for this in monetary and percentage terms. If the adviser is not charging for a report they must be getting paid somehow.
Make sure they are extremely clear on exactly how much they will get paid. You must get this in writing!
In some jurisdictions they may not be legally bound to give you this information. Again, this shows how important it is to use companies in regulated areas. If they refuse to provide any figures in writing, it should raise a red flag – you may even wish to avoid them.
Q: Are there any other charges involved?
This information can often be very well hidden in the mountains of paperwork you receive. The adviser should be able to clearly identify the total amount of initial and ongoing charges for everyone involved, e.g. trustees, pension provider, bond provider and investment house. Again, make sure you ask for this in writing.
If they cannot provide this assurance, then once again it should ring alarm bells. You should keep this on your records to protect you in the case of any disputes later down the line.
Q: Can I transfer or move my pension out at any point? Are there any exit fees involved in any money movement or transfers out?
Exit fees too may be hidden. Such fees may mean that if you are not getting the service you paid for, you would be at a considerable loss if you wanted to switch to another adviser. Some exit fees can even lead to you losing the majority of your fund.
Q: Are there any tax implications of a pension transfer?
Although most advisers are not international tax experts, they should still ensure that you have taken third party tax advice (if not given by them), prior to commencing any investments or transfers. The adviser should at all times be taking into account your residency and tax status, as this could lead to significant losses if not considered.
Q: What qualifications to provide financial advice do you hold?
You should ensure that your adviser has the appropriate qualifications to provide financial advice. Think of it this way: if someone were to carry out major surgery on you, would you want to know that they were qualified?
Q: How often will you review my pension with me?
Usually you will be paying an ongoing fee to an adviser to check the investments within your pension, and to rebalance them to make sure they are still in line with your circumstances, objectives and risk profile. If they are not providing this service, then you should ask yourself: what are you paying them for?
Some advisers may charge for the first 5-10 years of ongoing service at the start of the policy – meaning they are less inclined to review your portfolio as they have already been paid by the scheme. This usually means that if you decide to transfer within the period, you will still have to pay all of the charges for the 5-10 year period.
It is usually good practice to ensure you are ‘paying as you go’ so that you can sever the relationship if you find the advice is not appropriate.
Montfort is a UK based IFA with a team of fully qualified and regulated Financial Advisers, who specialise in pension transfers for UK expats. Click here to contact a Montfort adviser.