UK financial regulator acts on pension scam risk to British expats in the UAE

The UK's Financial Conduct Authority has issued an alert over the growing number of British investors, including those based overseas, at risk of having their pension transferred into unsuitable investments or falling victim to scammers.

The UK financial regulator is looking to crack down on domestic and international pension transfers in a move that could give added protection to British investors in the UAE.

The Financial Conduct Authority (FCA) has issued an alert over the growing number of investors at risk of having their pension transferred into unsuitable investments or falling victim to scammers. The regulator said in a statement published this week: “We are concerned that consumers receiving this advice are at risk of transferring into unsuitable investments or – worse – being scammed.”

The FCA’s alert applies both to domestic UK and international pension transfers, which it said are often carried out without considering the assets in which the client’s funds will be invested.

This is the latest front in a global regulatory attack on international advisers using questionable sales practices to sell expensive long-term savings plans, often aimed at international workers. It follows recent moves by the UAE’s Insurance Authority to change how savings, investment and life insurance policies are sold, in response to what the IA called “an alarming amount of complaints” from policyholders.

There have been similar moves in Qatar, Singapore, South Africa, Hong Kong, Poland and India.

Financial regulators in offshore centres in British crown dependencies Jersey, Guernsey and the Isle of Man, where many international insurers selling offshore insurance plans to UAE residents are based, have also stepped up warnings following a rise in scams.

The FCA pointed out that transferring pension benefits is usually irreversible, with any problems only becoming apparent years into the future.

“It is particularly important that firms advising on pension transfers ensure that their clients understand fully the implications.”

The watchdog refused to confirm press reports that it had been specifically looking into UK overseas-defined benefit (DB) pension transfers via Dubai, carried out by more than one international financial advisory firm.

Experts said the crackdown could make it harder for overseas-based advisers to persuade clients to invest in products that do not serve their needs.

“We are very much in favour of the FCA redoubling its efforts to crack down on pensions transfers in this way,” said Patrick Connolly, a UK-based FCA-regulated certified financial planner with Chase de Vere. “The FCA is now working harder to get the message out there following a rise in scams.”

Mr Connolly said UK-regulated advisers can be referred to the Financial Ombudsman Service, which can order the adviser to put the client back to the position they were in before, if they lost out following a pension transfer.

“There is a maximum on claims of £150,000 [Dh691,000],” he said.

The regulatory body can also issue unlimited penalties on the adviser, depending on their size and the level of mis-selling, with penalties decided on a case-by-case basis.

“It can strike them off in serious cases,” said Mr Connolly.

However the regulator can only clamp down on the UAE advisory firms it regulates. “It has no power over non-UK regulated advisers,” Mr Connolly added.

Tom Anderson, investment manager at UK-based Killik & Co, which has UAE clients, said any Briton carrying out a pension transfer should ensure the individual they deal with, and the advisory firm, are both regulated by the FCA.

“Otherwise they may have inadequate protection,” he said. “Also, make sure that the part of the firm you are dealing with is FCA-regulated, rather than another part of the company that is not actually giving advice on your transfer.”

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