Malta tougher pension rules which stipulates that advisers must be regulated in the jurisdiction where their client is based are soon to be enforced, a move that will affect tens of thousands of British savers.
The new rules, to be enforced on 1 July 2019 according to the Malta Financial Services Authority (MSFA), will impact the way in which pension trustees administer both new scheme applications and existing members on a number of levels. deVere Group estimates that in the UK alone, around 30,000 UK pensions have already transferred into a Malta-based Qualifying Recognised Overseas Pension Schemes (QROPS).
Under the new rules, licensed advisers must also be allowed to provide investment advice to the pension scheme member. The legislation was introduced in 2016 but is only now being enforced.
Malta is a preferred jurisdiction for those wanting to take advantage of the considerable financial benefits of transferring their UK pensions outside of the UK"
The tougher regulations further enhance client protections, as it is no longer enough for the financial adviser to only be licensed. An adviser's licence must also allow them to provide investment advice to the member. The adviser must also be regulation in the jurisdiction where the client is based.
"Malta is a preferred jurisdiction for those wanting to take advantage of the considerable financial benefits of transferring their UK pensions outside of the UK," deVere divisional manager of Western Europe, James Green, said.
"In a move welcomed by deVere, the Malta Financial Services Authority has made significant changes to the Maltese pension regulations. Coming into effect on 1 July 2019, these changes will have a major impact on how advice and service is given to those with Malta-based QROPS," Green added.
However, he said that it is "highly likely" that many advisory companies will be unable to meet some or all of the stringent new regulations and, therefore, will not be able to service new or existing clients in this area.
"I urge all retirees to check as a matter of urgency that their financial adviser is able to fulfil their obligations in accordance with the sweeping rule changes," Green said. However, deVere has worked with each of the Malta trustees to ensure that it continues to ensure that it continues to comply with the regulatory changes and the firm recognises these as a positive, proactive development.
Claire Trott, head of pensions strategy at St. James's Place Group, warned that transfers to overseas pensions need to be carefully considered as it may not always be the best thing to do.
She said: "Taxation in retirement often drives these transfers, yet in many cases at retirement the pension can be paid tax free in the UK whereas it can be taxed as income in the country in which the member is resident at the time, even if it is at a better rate.
"In addition, many people will return to the UK later in life or move elsewhere, which can then cause additional issues should they want to move their pension back to the UK or on to another country.
"Overseas pension schemes may not allow the onward transfer of a pension, and a UK pension scheme may not be willing to accept the funds back from an overseas scheme, especially if not held in sterling or already in payment."
The industry has sided with the regulator in Malta regarding the significant changes to the Maltese pension regulations which will have a major impact on how advisers operate in the jurisdiction.
Malta Association of Retirement Scheme Practitioners (MARSP) said the new framework issued at the end of 2018 governing personal pension schemes in Malta would make the sector more resilient.
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