Dodgy offshore pension advisers are responsible for a flood of Qualifying Recognised Overseas Pension Scheme (QROPS) scams, according to a leading financial firm.
Pension provider Xafinity says frauds were detected in more than 10% of hundreds of QROPS pension transfer requests the firm handled in the past year.
The most common scam was tricking retirement savers to hand over their cash by offering a free pension review or free advice.
Another scam included advisers recommending QROPS offshore pensions to retirement savers who still lived in the UK or had no reason to transfer their pension pot to a QROPS. UK residents are barred from investing in a QROPS pension.
In many cases, consumers did not know they were switching to an offshore pension.
Fraudsters getting better
The firm’s head of propositions Paul Darlow also explained financial advisers also took advantage of investors by offering them risky unregulated investments.
“Fraudsters are getting better at concealing their intentions and we are finding spotting scams is getting harder all the time,” he said.
“Another problem we are finding is that unlicensed introducers are offering free pension reviews and finding clients for regulated advisers.
“This makes identifying a potential scam much more difficult as we cannot see who is giving regulated advice and who isn’t.”
Xafinity confirmed most of the transfers flagged as potential scams were blocked.
Protecting yourself against scammers
One of the problems with QROPS is that although they are regulated in the country where they are based, the rules are different in many financial centres. More than 1,150 QROPS are available in 41 countries.
For instance, in Australia, the government regulator demands a licensed Australian adviser must recommend a QROPS transfer.
Expats in many countries without a QROPS provider also have difficulties in sourcing reliable and regulated independent financial advisers – especially in places with large numbers of British expats such as Thailand.
HM Revenue and Customs (HMRC) supervises QROPS worldwide and publishes a list of recognised pensions every fortnight. Fund transfers are only allowed to schemes on the list.
QROPS are only open to British expats or foreign retirement savers who now live abroad and have a pension fund in the UK.