Starting in 1994 financial regulators began the almost impossible task of unravelling Britain’s corrupt pension industry and pension mis-selling.
It took years, during which those affected lived a life in limbo, waiting to see whether they would ever be able to rebuild their lives.
In the end, the pension mis-selling scandal in the UK cost the companies behind it billions of pounds in compensation – and rightly so.
Equally, the state earnings related pension scheme (SERPS) blunder cost the government billions to put right.
After the Pension Mis-Selling Scandal Britain Cleaned Up its Financial Services Industry
Arguably the mis-selling scandal was the catalyst that has resulted in real change in the financial services industry in Britain.
There are no longer commission only salespersons desperate to sell you something, anything, in order to make a living. What’s more, the regulators behind the industry are more robust, and there is a well-publicised Financial Services Compensation Scheme in place, in the event a firm goes bust and can’t pay claims against it.
Overseas Financial Services Industry is a Different Story
Overseas however, expat victims of mis-selling are continuing to line up every day of the week, as the industry is not only subject to sketchy regulation at best, but it’s still being exploited to the max by unscrupulous salespeople who care only about their commission, instead of their clients.
The trouble is, within this cesspool of sharks, there are decent firms attempting to look after their clients, and steer them away from the headline offers of the unscrupulous companies.
But all too often, the companies shouting the loudest are the only ones heard – and they are the ones doing the dodgiest of deals and leaving their clients reeling from their financial losses.
Perhaps the worst aspect of the mis-selling that goes on in the overseas financial services industry is pension mis-selling.
What About Expat Pensions?
There’s a lot of money in pensions! Literally. And that’s why unscrupulous advisers target them. The more money in a person’s pension scheme, the more money in the form of commission an adviser will receive if they get their hands on it and transfer it or ‘liberate’ it.
The bottom line is there may well be a very valid case behind an expat transferring their frozen or abandoned or underperforming onshore pension abroad. However, there are so many dangers to be aware of that you have to have best advice before you proceed.
But how can expats find best advice, how can they be sure they are getting best advice, and what can they do if things go wrong?
Some companies are regulated, some recommend decent pensions from good companies in financially stable jurisdictions, and some will genuinely help you make the most of your money now that you’re abroad.
But how can an expat sort the wheat from the chaff?
How Can Expats Avoid Being Mis-Sold?
Whilst we do our best at Degtev, it’s certainly good to have a second opinion, and when it comes to pensions one organisation is attempting to help those who have been mis-sold, as well as those who are just starting on the journey of seeking pension advice.
The organisation is called Pension Life, and the main person behind the organisation is Angela Brooks, who is a retired tax adviser. Ms. Brooks has been instrumental in supporting victims of mis-selling, and is now running her Pension Life website to try and help people before they even seek financial advice.
Speaking about her professional background, Ms. Brooks advised us: “I was a lay barrister – not called to the Bar. I acted in the General and Special Commissioners (now the Tax Tribunals) for clients who could not afford professional barristers. I was formerly Director of the British Taxpayers Federation.”
Ms. Brooks wants to ensure expats are fully informed about how the overseas financial services industry works, in order that they only seek advice from qualified and regulated, reputable firms and advisers.
On her site she has a good article about key questions expats can ask an adviser, and she also offers to vet an adviser or advisory for her site’s readers.
Whilst we cannot vouch for Pension Life getting it right every single time, after all they criticised AES International only to retract their criticism when they realised it was unfounded, but at least the organisation exists to help expats and is doing what it can for those who have been mis-sold.
There is precious little support for expats left out on a financial limb abroad, so we really welcome what Ms. Brooks and her team at Pension Life are doing.
Pension Life’s Questions for Expat Financial Advisers
In the meantime, here are our favourite tips from Pension Life about what to ask an overseas independent financial adviser who you’re considering employing to help you: –
1) Where are you regulated and which regulator regulates you? Are you regulated as a branch in this country, or are you on a services licence regulated from your home country? If the latter, note the adviser cannot be based in your country.
2) What activities does this regulation cover?
IMD licence – covers the sale of insurance products
MiFiD licence- covers the provision of investment and non-local pensions advice
3) What investor protection does your regulator provide? (The Gibraltar regulator, for example, does not resolve disputes between consumers and regulated firms.)
4) What are your qualifications, how can I check them and how are they relevant to the advice I am getting from you?
5) What level of Professional Indemnity Insurance do you hold and is it relevant for the products or services you are recommending?
6) How are you paid? If via commission, will the amount be disclosed and agreed in writing before any transaction takes place? If fees, will a fee schedule be provided at the first meeting?
7) Will any product recommended have any early encashment penalties and, if so, are there alternatives?