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UK Pensions: Scams, lies and the facts

By Sam Instone - March 02, 2016

UK Pension Scam[Estimated time to read: 3 minutes]

“Your pensions in the UK are frozen”

“You need an offshore bond to invest”

“All costs are paid for by the provider”

“Guaranteed returns on offer”

“All income can be taken tax free from a QROPS”

Have you heard any of the above statements when receiving a cold call from one of the less-than-scrupulous offshore financial advisory companies here in the UAE? It’d be a surprise to me if you haven’t.

When I moved to Dubai in October, I took out a mobile phone contract and one of the first calls I received was to arrange an appointment with a Wealth Manager and Pensions Expert to transfer my ‘frozen’ UK pension(s) to a Qualifying Recognised Overseas Pension Scheme (QROPS).

Now, given that I’m a fully qualified Chartered Financial Planner and Pension Transfer Specialist, it was a major surprise to “find out” that the portfolio I’d established in the UK inside my Self-Invested Personal Pension (SIPP), which comprised low-cost passive funds, had automatically stopped growing due to my decision to move to the UAE.

Naturally I was interested to hear more and thankfully Mr Charisma, my friendly international wealth manager, had some time to talk through the QROPS with me.

With this I would apparently get guaranteed returns of c7% per annum, provided by a structured note facilitated by a leading US Bank, and a tax-free lump sum; plus there would be no income tax whenever I came to draw down the pension, and the death benefits would be so much better even upon my eventual return to the UK.

And how much did I have to pay for this invaluable advice? Absolutely nothing, as it was all provided by the provider that Mr Charisma would move my pension to.

All of this seemed amazing and to be honest I’d have felt stupid if I hadn’t proceeded except for one thing…

It’s all an absolute lie.

Your pensions in the UK are NOT frozen…they still grow, generally tax-free.

You almost certainly do NOT need an offshore bond – this is an additional cost that is not required and the tax advantages that an offshore bond provides, are in the majority of cases, not required when it comes to pension funds.

The costs are NOT paid by the provider…instead you will pay them every year and face an exit penalty which can continue for up to 10 years. This allows Mr C to take an initial 8% commission up front (and sometimes higher).

There are NO guaranteed returns – all investment carries varying levels of risk, and returns are not available every day, week, month or year; so a guaranteed return of 7% per annum is not possible. Also, structured products are specifically aimed at (and generally only appropriate for) professional investors, not retail investors (i.e. you and me).

NOT ALL income can be taken tax free – it can if you remain in the UAE in retirement but is this likely to happen? If you move anywhere else in the world you will be due to pay tax in the country you are resident and could, in fact, also be taxed by the county that your pension is held in (i.e. Malta, Gibraltar etc).

I am frankly so disgusted by what I have seen and heard since moving here, that I want to hold an educational seminar, to set the record straight and answer any questions you might have.  Even if you have an adviser already – and he’s a great guy or gal who is ‘definitely looking after you’, I would urge you to attend.  I am one of the only qualified pension transfer specialists in the UAE – and this makes my blood boil.

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