UAE-based Holborn Assets is the latest international financial advisory firm to get caught up in a UK regulatory crackdown on pension transfers.
The Financial Conduct Authority (FCA) has ordered Holborn’s UK division to cease all regulated pension transfer business introduced by overseas advisers with immediate effect.
Holborn Assets has headquarters in Dubai, with offices in both the UK and South Africa. However, the FCA order only applies to the regulated activities of the UK entity, Holborn Assets, in providing advice to transfer clients out of safeguarded pension scheme benefits.
Simon Parker, chief operating officer of Holborn Assets in the UAE, said the FCA’s move has no relevance to the company’s UAE customers. “Holborn Assets Insurance Brokers LLC is licensed by the UAE Insurance Authority for whom its business as usual,” he said.
According to Holborn in the UAE, its UK entity Holborn Assets Limited's licence was voluntarily suspended along with over 80 other companies and during this period it was in regular contact with the FCA to agree a process for it to offer pension transfer advice again in the future.
Experts say this review was part of a sustained FCA crackdown on international advisory firms that encourage British expats to transfer money out of their UK defined benefit final salary workplace schemes, and into offshore savings and investment plans.
In February, the London-based watchdog ordered the UK arm of another international advisory firm with a strong UAE presence, deVere Group, to stop providing reports on overseas pension transfers.
A notice on the FCA website states that under section 55L of the Financial Services and Markets Act (2000) Holborn Assets in the UK must “immediately cease all regulated activity relating to pension transfer business introduced by overseas advisers”.
The ban will stay in place until it can provide independent verification via a “Skilled Person” showing a “robust and compliant advisory process is in place in respect of the pension transfer business introduced by overseas advisers”.
Holborn must show that it is “adequately identifying and managing its conflicts of interest”.
The skilled person must undertake a review of the firm’s past pension transfer business, including business introduced by both overseas and UK advisers, to see if it complies with UK regulatory standards.
Any business currently in the pipeline must not proceed if the review shows that proposed advice is “unclear or unsuitable”.
The company is also barred from making any unusual or significant payments to shareholders, employees, officers or partners without prior consent from the FCA, until the review is complete.
The FCA order covers cases where foreign advisers contact Holborn’s UK arm asking it to arrange the pension transfer out.
Mr Parker said the FCA has no jurisdiction in the UAE and the company will continue to transfer pensions and perform other services for its expat customers. “Holborn Assets UK is still very much open for business and authorised by the UK regulator,” he added.
Mr Parker said there are still excellent reasons for a British expat to transfer their pension. “However, there are also excellent reasons as to why HM Revenue & Customs wouldn’t want this to happen, as they lose huge tax revenue.”
Earlier this month, the FCA tightened rules on Britons living outside of the European Economic Area (EEA) transferring pensions to qualifying recognised overseas pension schemes (Qrops).
James Badcock, partner at UK private client law firm Collyer Bristow said some transfers were legitimate but many were not. “The rules have been abused and some providers have marketed Qrops aggressively and led people to use them inappropriately.”
Geraint Davies, managing director at Montfort International, an FCA-regulated adviser in international pension transfers and taxation, said that anybody residing in the Middle East, who has transferred their UK pension to a Qrops since 2006 should contact the firm concerned and put on notice that they are contemplating a complaint for the advice process and demand a copy of all the paperwork.
“We have seen transfer after transfer which if conducted according to UK standards would never have proceeded. Many were from UK final salary schemes which have been described as unsuitable to get a sale,” he said.
Mr Davies said that any pension transfer report has to be of an extremely high standard and completely unbiased, and consider all tax, visa and currency consequences. “Since 2006, we have never seen a transfer process conducted and report issued by an overseas adviser that would meet our standards. I believe the UAE is flooded with victims,” he added.
He urged expats to shun any firm that does not charge an upfront fee for the technical pension transfer report. “It has a conflict of interest because the adviser will not get paid unless you transfer. It must be a completely independent report.”
Mr Davies added: “The FCA is clearly cracking down and is on a mission, they are getting more and more intelligence and will get more when they are contacted by potential victims. This won’t be the end. The system is broken and needs to be fixed.”
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