The Money and Pension Service (MaPS) has revised a key pensions guidance document over concerns it could lead to non-UK residents facing an unexpected tax bill.
The Money and Pension Service (MaPS) has revised a pensions guidance document after a Surrey IFA firm pointed out it had omitted important information that could protect retirees from making costly decisions.
Geraint Davies, the managing director of Montfort, a specialist financial planner with international clients living overseas, wrote to Caroline Siarkiewicz, the chief executive of MaPS, expressing concerns with the MoneyHelper guidance document
This is because in some countries pensions may not be accessed tax free and without proper planning, consumers face a considerable tax liability.
Davies said that over the past five years, since the version of the guide was introduced, it had been issued to consumers regardless of where they live.
He said: “I know someone who was in England visiting his sick father and went for a meeting with PensionWise.”
“He was told by the PensionWise representative they didn’t know anything about the overseas situation between the UK and Australia, but gave him this document and continued to provide information that was of little use.
“He was so confused, he rang an IFA who put him on to me. Had he followed the guidance he was given by Pension Wise – despite knowing he lived outside the UK – he’d have faced a £15,000 tax bill from the Australian authorities.”
The word according to MaPS
The letter Davies received from Siarkiewicz said MaPS did not intend to withdraw the leaflet as it is of a “general nature, and…not intended to cover all the specific circumstances that individual finds themselves in”.
With regard to tax free references, “the leaflet already refers to elements of an individual’s pension savings ‘usually’, or ‘normally’ being tax free, which means it does not state that such tax free status is a given in all circumstances,” said Sarkiewicz.
“The leaflet also states that individuals should either seek a Pension Wise appointment or independent financial advice and therefore it is clear that the leaflet is not the sole information to be relied upon when making decisions to access pension savings”, and additional guidance may be required for complex overseas tax affairs.
It continued: “Individuals who receive a Pension Wise appointment will receive guidance relating to the fact that then being based overseas, including direction to further sources of information relating to tax”, and as aimed at the public, pensions jargon has been minimised.
Finally, MaPS said it would expect schemes that are aware of the location of a member to consider whether additional specific information may be needed to be supplied, “but we do not consider that this invalidates all the information contained in the leaflet”.
Simply not good enough
Davies was not satisfied with the response and a wrote lengthy reply, to which he received a response from interim head of money and pensions policy, David Bateman, thanking him for his feedback and that they “will consider whether it is necessary to make amendments to ensure individuals understand that it is focused on UK residents”.
Bateman continued: “MaPS’s focus and remit is on those resident in the UK and we include that statement in our terms and conditions,” and producing material for non-UK residents “would need careful consideration”.
Davies pointed out that consumers would be hard pressed to understand MaPS UK focus, as those terms and conditions are not contained in that – or other guidance documents – and may only be available via the MaPS website.
On 14 July, just over one month after Davies wrote to MaPS, he received another message from Bateman thanking him for his “further reflections on this issue” and to notify him that the “update to the guide is going through its final editorial stages and I anticipate will be updated in the next few weeks”.
Job half done?
Despite making his point and forcing MaPS to update its guidance, Davies is not satisfied with the way MaPS handled his concerns.
“Getting MaPS to change this document is only the starting point,” said Davies. “Money Helper cannot be allowed to brush this under the carpet.”
Davies was particularly keen to impress upon MaPS that such an omission was a free play for pension scammers looking to catch out the unwary who were considering accessing their pension from overseas.
He has, on occasion, been accused of trying to mislead clients, because the tax liabilities he warns of are not covered within the official guidance documentation, nor discussed during some meetings held with Pension Wise, both provided by MaPS, the consumer education arm of the Department for Work and Pensions.
“Its turned into a nightmare,” added Davies, “saying Money Helper is misleading is not an easy thing to say.
“If this is not made public by Money Helper, people will suffer. If they draw attention to the dangers, people may realise how important it is to check exactly what is in front of and that may go some way towards thwarting scammers.”
There’s a lot of it about
Scammers remain a constant threat, with the highest ever number of people receiving unsolicited approaches about transferring their pension being received in Q2 this year, according to the latest pension scam assessment analysis from helpandadvice.co.uk.
Between April and June, 1685 pension scam assessments – as recommended by MaPS’s Money Helper – were completed between April and June.
One quarter of those approached were asked to make a quick decision on whether to transfer, a significant increase on Q1’s 15%.
The average scam likelihood score was 23%, meaning that of the 1685 people that completed the assessment, almost a quarter of cases had associated red flags.
A red flag does not guarantee a definite scam, but it does mean further investigation is required.
Over the past year, helpandadvice.co.uk has found that the potential likelihood of a scam remains consistent at around 25%.
Offering help and guidance
When asked about Davies’s concerns, a MaPS spokesperson told Pensions Expert: “It’s not the role of MaPS to speculate on consumer detriment, nor can we advise people on what they should do financially.
“Our remit is to provide help and guidance to people, including making them aware of their general options and the risks associated with pensions. We would urge everyone to gather all the information they need to make the right decision for their circumstances, including taking regulated financial advice if they need it.”
When asked how the market would be made aware of the guide’s revisions, the spokesperson said: “We will disseminate the guide using our standard process. We will also continue our work to reach as many people as possible with the help and guidance they need.
“This guide seeks to make people aware of their general options and the risks associated with pensions and is consistently updated based on the feedback we receive.
“It also makes people aware of scam risks and, with the revision, will clarify the potential different tax treatment should someone living abroad seek to access their UK pension.
We would urge everyone to gather all the information they need to make the right decision for their circumstances, including taking regulated financial advice if they need it.”
“This guide is not designed to inform people of the risks or tax liabilities when seeking to transfer a pension overseas. There are separate safeguards in place covering this issue, for example those set out in the Occupational and Personal Pension Schemes (Conditions for Transfers) Regulations 2021.”
