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FSA tax warning to advisers on Qrops

The FSA has warned that advisers must ensure they factor in all the overseas tax implications of clients looking to transfer pensions offshore in response to concerns over Qrops.

In a letter to Montfort International, the FSA acknowledges that many IFAs are not conversant with overseas tax regimes but it says it expects them to take all material circumstances of a client’s future plans into account when making a recommendation.

The letter says: “We would consider that any adv-iser who does not take into account all material personal circumstances and plans is failing to treat their customers fairly.”

Montfort International had written to the regulator asking for confirmation of the responsibility of the IFA in light of the current controversy around the schemes.

Managing director Geraint Davies says advisers who fail to understand and make the client fully aware of the possible range of tax implications could face the wrath of the regulator.

HMRC recently deregistered all Singapore-based Qrops and the Australian Treasury recently proposed to pool all pension pots of temporary residence visa holders into one central governmental pension fund.

Davies says it is an IFA’s responsibility to communicate possible changes in tax regimes to clients to pre-empt and prevent similar situations happening.

He says: “Advisers need a strategy and if they don’t know what they are doing, they should walk away.”

Jonathan Fry & Co director Jonathan Fry says: “In the same way that there is a spectrum of risk involved in investment, there is also a spectrum of risk involved in tax planning. HMRC is evidently keen for Qrops not to be exploited as a pension liberation exercise. Advisers who pursue aggressive higher-risk investment strategies like this need to be careful that their clients are aware that tax rules could change and that they fully understand the risk involved. If they don’t do this, they risk being dragged into the firing line.”

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