"The result is that members resident overseas with safeguarded pension benefits may be financially disadvantaged by having to seek two separate sets of advice"
In April 2015, a legal safeguard was introduced that requires members with safeguarded pension benefits of more than £30,000 take financial advice before they access the pension freedoms by transferring or converting to a form where they can be accessed flexibly.
However in a call for evidence published today, the Government says it has been made aware that the advice safeguard has "produced additional complexities" for individuals who wish to transfer their safeguarded pension savings to a non-UK pension scheme, for instance because they are resident outside the UK or moving overseas on retirement.
DWP's preliminary analysis that suggests there could be around 700,000 individuals living abroad with private sector contracted-out salary related DB pensions not yet in payment.
It is now gathering information on how the requirement to take advice is working for overseas members, and whether the current process should be adapted to work better for individuals who are moving or already resident overseas.
The government says it is aware that prior to the introduction of the advice requirement, a member would often seek out a non-UK based financial adviser because they were able to advise on local tax rules and/or the suitability of overseas pension schemes. Alternatively local advice would be sought because it was a requirement of the receiving scheme or overseas financial jurisdiction.
In the call for evidence, the government said: "By contrast, UK financial advisers may not wish, or be able, to offer this form of specialised transfer service covering the tax and pension rules of the member’s country of residence. The result is that members resident overseas with safeguarded pension benefits may be financially disadvantaged by having to seek two separate sets of advice, one to meet the conditions of the new advice safeguard requirement and another from a local overseas adviser to advise on issues relating to the transfer overseas, such as tax implications or timing of the transfer to minimise the impact of currency fluctuations."
The government says an alternative could be permitting the overseas member to seek equivalent advice in their country of residence.
However it raised concerns that the FCA cannot set, monitor or enforce standards for advice received overseas, which "adds a series of barriers to developing an alternative process".
Additionally, it asked how trustees and scheme administrators might verify that a member resident overseas had genuinely received advice from an authorised provider in their own country.
As a solution, the government says its discussions with stakeholders have revealed that it may be possible for overseas advisers to take and obtain relevant qualifications, either set by relevant professional bodies in the UK or equivalent qualifications that are set within their own financial jurisdiction.
A possible option is therefore to create or identify a recognised set of minimum standards by which advisers could demonstrate they have obtained the relevant qualifications to become a pension transfer specialist. Overseas advice might then only meet the advice safeguard if it is delivered by overseas advisers who can demonstrate they have met a minimum set of standards.
The Government therefore seeks views on what scope there is to design an alternative process that offers protection to members resident overseas and if there are any measures that could be put in place to minimise risk.
