The government is consulting on whether it should abandon the mandatory advice requirement for safeguarded pension transfers for members outside of the UK.

As it currently stands, in order to prevent individuals from unknowingly giving away valuable pension rights, a legal safeguard has been in place alongside the pension freedoms since April 2015. This requires members whose pensions are greater than £30,000 to take financial advice before they access their pension freedoms by transfer.

In a consultation released by the Department for Work and Pensions, today, the body noted that UK financial advisers may not be able to provide a “specialised transfer service covering the tax and pension rules of the member’s country of residence”.

The paper also mentioned that members may face unnecessary risks as advice will be provided in “two different jurisdictions, with the result that it is not clear how the member should seek recompense in the event of a poor outcome as a result of advice”.

Nonetheless, it has said that the complete removal of the advice requirement for overseas members could have negative outcomes.

“Removing the requirement to take regulated financial advice increases the risk of a member deciding to make an unsuitable transfer to an overseas scheme,” it said.

The DWP has noted that there are around 700,000 ex-pats with DB pensions not yet receiving payments and the number with other safeguarded benefits exceeds this.

AJ Bell pensions expert Mike Morrison commented: “The advice requirement was introduced to protect savers from losing valuable guarantees when they transfer to a defined contribution scheme in order to take advantage of the pension freedoms.

“This protection is arguably even more crucial for people moving their money to overseas schemes, where regulations and advice standards are likely to be lower than in the UK. In considering how to make it easier for people living overseas to get advice on a potential pension transfer the consultation needs to ensure it does not water down the advice requirement so much that overseas transfers can be made without any advice at all.

“This could open the door to unscrupulous pensions salesmen and at the same time reduce the Treasury’s tax take as it becomes easier for people shift their savings to different tax jurisdictions.”

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