Financial Giants Blame Dodgy IFAs For Expat Pension Scams

A probe into expat investment scams launched by pension product providers puts the blame firmly on fraudulent IFAs.

Over the past decade or so, the expatriate financial world has been rocked by scandal after scandal, with devastating results for expat investors and those transferring their pensions overseas. The investigation, initiated by the industry’s Pensions Scams Industry Group (PSIG), saw scrutiny of over 27,000 pension transfers offered by three providers, XPS Pensions Group, Standard Life and Phoenix Life. Transfers to defined contribution schemes from defined benefit plans were covered, involving a sum in excess of £1.3 billion.

One significant result of the probe revealed due diligence was carried out on 52 per cent of all transfers, sparked by investigators’ suspicions of scams due to unregulated introducer involvement. Other triggers for further investigation involved IFA introducers based in different countries than their clients, and also included IFAs on industry watch-lists due to previous concerns over their alleged scamming activities. Another somewhat unsurprising result of the probe was that provider companies themselves are genuinely concerned over retirement savers’ general lack of knowledge about how pensions work. This, they say, results in an inability to make sensible financial decisions as regards pensions and leaves retirees open to scamming by unprincipled IFAs both as expats already living overseas and pensioners planning to leave the UK.

In some 50 per cent of the cases reviewed by the group, pension savers were unaware of the origin of advice given, fees being charged and the recipient pension scheme itself. Another surprise result of the investigation won’t make the FCA jump with joy, as it seems its cold-calling ban isn’t likely to be as effective as expected as only six per cent of all transfers were the result of a cold-calling strategy. The vast majority of suspicious cases were a direct result of ‘grooming’ by unregulated introducers or IFAs. Modern methods of trapping financial victims are now concentrated on word of mouth, online advertising and social media as well as ‘factory-gating’, all of which need to be addressed by the UK’s financial watchdog.