Would be expat retirees warned over dodgy investments

If you’re looking to plan for an expat retirement in a totally new environment, you need to take care your investments are secure.

According to a scary report by Britain’s Financial Service Compensation Scheme, some 80 per cent of claims against dodgy IFAs involved investments in possibly fraudulent schemes such as storage lockers and forestry. The majority of the £125 million compensation paid to defrauded British investors through the scheme involved investors handing over their cash to IFAs touting high-risk investments by promising unrealistic returns.

As a result, there’s now a basic distrust of advisors at all levels in the sector, as both regulated and unregulated advisors are seen pushing risky investments. Being able to determine between safe and risky investments is tricky for would-be expats with little or no knowledge of the financial world, especially since pension freedoms were introduced. If the IFA is registered, disgruntled investors can apply for compensation when they realise they’ve been sold dodgy investments, as the advice given is regulated although the investments themselves may fail to measure up to IFAs’ promises.

Speaking at an industry conference, CEO of the FSCS Mark Neale said most investors receive good advice, but when things go wrong it’s almost always the so-called high interest investments which prove toxic to people looking for a retirement income to back up their inadequate UK state pensions. Those looking to transfer their pensions to a SIPPs or QROPs are the worst affected, often losing part or all of their pension savings as a result. Although the FSCS scheme gives some reassurance, he added, the costs of compensation do need to be spread across the entire industry.

Both Neale and Mary Starke, the FCA director of competition, agreed that removing unregulated investments from the FSCS’s scope wouldn't have any effect on investors buying into dodgy schemes, and weren’t in favour of restricting certain investments to experienced investor uptake. Both consider experienced investors can be caught by high-risk investments as easily as can those with little or no experience of the financial world. Would-be expats are especially likely to be scammed, along with retired expats living in many world countries who can't take advantage of the FSCS’s services as regards compensation.