If you’re moving to a new country to work or retire, you’ve heard warnings about the less desirable areas you should avoid. Where you’re most likely to get robbed of your money by pickpockets. Tourist-priced restaurants. True thieves, though, may have escaped your attention, and they may end up costing you everything.
Unscrupulous salespeople posing as financial advisers target expats for one of two reasons: either they are working in a high-earning, low-tax environment abroad, or they have moved to a new nation to retire with all their funds in tow.
These characteristics, when added to the fact that expats may be unfamiliar with the rules and their rights outside of their home countries, can leave them especially susceptible to pension mis-selling.
Lawyers are increasingly convinced that a huge number of foreigners have been mis-sold costly and underperforming pensions. There will likely be a surge in pension lawsuits, in which investors sue retirement companies, fund managers, and financial advisors for compensation as a class.
This is since pension misselling typically follows a predictable pattern, which can be obscured during the experience. The pension plans that overseas salespeople peddle to expats are universally bad. They all include overpriced instruments like life bonds.
Long-term savings contracts that require monthly or annual contributions are marketed to working expats. The longer the contract, the more money the salesman who sold you the scheme would make. For example, under a 20-year contract, the salesman may get a commission equal to half of the first year’s premiums while you save.
Mis-selling typically occurs in the following ways for retirees living abroad:
- fees of around 15% of your pension’s value to transfer it.
- an expensive offshore bond “wrapper,” costing another 2% a year.
- underlying investments, weird and not so wonderful funds like fine wine and land bank schemes, but more often so-called ‘life bonds’ sold by insurance companies.
- hidden commissions for the ‘free’ advice you received for all this.
In this formulaic procedure, your specific requirements are ignored.
No one wants to waste their time and money in a drawn-out legal struggle when they’d rather be working or relaxing abroad. Before working with a financial advisor, it’s important to do some research and find out how much it will cost. Get a pension review as quickly as possible from a reputable independent financial adviser if you are concerned that you were mis-sold a pension.