Malta QROPS

UK to EU Pension Transfers

Malta is the jurisdiction of choice for QROPS pensions in Europe because it is inside the EEA (European Economic Area). It is a strong financial centre, well regulated, allowing for pension freedoms and has many dual tax treaties in place with other member states. The Maltese regulator (the MFSA) concluded a review of the sector in 2019 and implemented new rules from January lst that year. This was big news for the industry as it made a split between those who could, and could no longer give pension investment advice to clients. Furthermore the new rules restricted the type of investments to those only appropriate to the retail sector. Good news as it now provides protection for pensioners against cowboy salesmen touting exotic, complicated derivative type investments which are entirely inappropriate at retail level. Furthermore there are now strict requirements around transparency in terms of fees, charges and commissions. Another welcome change which should eliminate rip off rogue advisers for good.

As anticipated and reflected in significant discussions with Adviser firms (a summary of which you can read HERE) there is now a need within the new Rules to be fully authorised to provide investment advice under MIFID II (EU Directive 2014/65/EU). Furthermore, The Insurance Distribution Directive ('IDD') authorisation (EU Directive 2016/97), is also required when advising on a Life Assurance Bond sat inside the pension. If an advice company does not have the Mifid license, they must appoint a suitably regulated external discretionary fund manager (DFM) to advise and manage the investments, who in turn must be licensed under Directive 2014/65/EU. This will be an extra layer of cost to the client. We are part of a group that has the MIFID 2 license so no such extra expense is incurred. We also have our own, in-house DFM should they be required.

Outside Europe, an "equivalent level of regulatory supervision" must be in place. MFSA guidance has confirmed they require regulatory supervision in terms of authorisation, supervision and enforcement, and the jurisdiction must be a country that is a signatory of the International Organisation of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MOU) or other jurisdiction with which the MFSA has a suitable MOU. Otherwise a suitably regulated DFM must be appointed as outlined above. In all cases, the Rules also require that the Adviser must be authorised and regulated to provide such investment advice to the Member.

What does it mean for pension holders?

Any company or individual giving investment advice on a Malta based pension, such as a QROPS, must now have a MIFID license. This is preventing a lot of European firms from giving advice in this area as it has been previously done under insurance regulations. Clients may now find themselves without a professional adviser for their pensions as MANY firms do not hold the newly required MIFID license.