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Pensions
Investment bonds within international pensions?
By Daniel Pitaluga, Wealth Manager, Abacus Wealth Management Ltd
In the time I have been advising clients on their existing pension structures, I have noticed an equally surprising and worrying trend – the use of investment bonds within international pensions,
specifically QROPS. A QROPS is a Qualifying Recognised
Overseas Pension Scheme, and this type of pension is used by UK residents who wish to retire abroad and take their pensions with them. This type of product is popular amongst UK-resident retirees who have moved to Gibraltar, or Gibraltarians who have previously worked in the UK and transferred their pensions back home.
An investment bond, or a Single Premium Investment-Linked Life Insurance Policy, is essentially a way of holding investments within a life insurance contract. Individually, both an investment bond and a QROPS have several benefits and, if the client profile is right, they can form part of an effective retirement planning strategy. However, the
issue arises when advisers recommend placing an investment bond within a QROPS, which has become an all-too popular structure locally.
The main issue with this structure is that investment bonds are one of the few products that Gibraltar financial advisers can still receive commissions from and these commissions can be exorbitant. The UK and Spain have both banned advisers receiving commission payments on these types of products. Legislation is in place in both countries which require advisers to publish a transparent fee structure so that clients can negotiate and agree a fee before any work takes place.
In Gibraltar, there are two ways in which a financial adviser can be remunerated. They can charge the client an upfront fee or receive a commission from a product provider for introducing the business to them. At first glance, to the client, it may seem as though their adviser receiving a commission
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Gibraltar International
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