Pensioners are “vulnerable” to financial companies registered in the European Economic Area, who by default gain a place on the FCA register, despite their home countries having less stringent protection rules in place.

AES International has warned companies are free to sell financial protects in other member states, if they are registered in their home country under the EEA’s Freedom of Service rules. This means, a company regulated in any of the other 30 countries within the EEA can sell products in the UK, without being directly regulated by the Financial Conduct Authority (FCA).

The company’s head of pensions James McLeod believes that pensioners, particularly those with homes abroad, are particularly vulnerable to these organisations.

“Ultimately, people must take personal responsibility for ensuring they take advice from a professional firm which has their best interests at heart.

"However, more could be done by the FCA, pension schemes and even the advice industry, to raise awareness of this issue,” he stated.

However, he commended The Pensions Regulator for raising awareness of pension scammers targeting those seeking to utilise the new pension flexibility rules.

“In our view, the problems caused by these firms are potentially just as serious, if not more so, than the pension scams and deserve just as much publicity,” he added.

This is because consumers who use a company based in the EEA will have no recourse to the Pensions Ombudsman and could be left out of pocket if something were to go wrong.

Furthermore, if the FCA has cause for concern about a company acting under these passporting rules, the only action it can take is to complain to the company’s home regulator.

AES International chief executive Sam Instone said it is a very real problem for British investors.

“Not only are these consumers at risk, they are often getting completely ripped off, as these firms use charging structures which have been outlawed in the UK – such as hidden commissions,” he explained.

He reiterated that the consumers most at risk are those who travel frequently or those who spend large portions of their time living elsewhere, such as those in retirement.

“These companies often build relationships with people while they are abroad and make much of the fact that they also have a UK office, giving the false impression that they are UK regulated and lulling people into a false sense of security,” he said.

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