🔒 Managing pensions across borders: Why expat retirement savings are at risk

In today’s globalized economy, expatriates – many of whom are South African – face a daunting challenge in managing their pensions across borders. Many are lured by promises of simplified transfers and tax benefits, only to find themselves entangled in a web of opaque fees and legal pitfalls. Recent regulatory actions against firms like Brite Advisors underscore the risks, leaving retirees like Mike Rose stranded without access to their savings. As the expat population grows, so does the urgency for clearer protections and guidelines in navigating this complex financial landscape.

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By Amy Bainbridge and Ainsley Thomson

For the millions of expats who leave pension pots behind as they job-hop through the world’s financial hubs, retrieving that money has become a costly experience fraught with peril.  ___STEADY_PAYWALL___

Often earning more than they would back home and holding sizeable assets and pensions, the growing population of globally mobile workers has become a prize for financial service providers. Agents offer to help people relocate their pensions and investments, relieving them of having to deal with burdensome paperwork or the maze of cross-border laws. For years, such services — among them funds that may charge excessive fees or lack transparency about risks — often operated beyond official scrutiny.

Regulators are finally starting to take action, with investigations into Brite Advisors, a pension transfer specialist suspected by Australian and US officials of mishandling clients’ funds. 

The Australian Securities and Investments Commission says Brite repeatedly failed to file financial statements and was a risk to the public, and a Federal Court order is in place to wind up the company.  In the US, the Securities and Exchange Commission has launched court proceedings against Brite’s US business. 

At stake is the biggest asset many hold outside of real estate: their retirement savings. In Australia, officials say tens of millions of dollars of clients’ funds at Brite are unaccounted for and have frozen accounts while they investigate the company, leaving customers without access to their money and wondering how much can be recovered. 

“There’s been a lot of frustration and sleepless nights,” said Mike Rose, a 61-year-old dual British and Australian national living in Sydney, who says he has lost access to A$285,000 ($186,000) of retirement savings with Brite. “I feel… so, so sorry for people worse off than me.”

A Brite officer, Tommy Li, based in Hong Kong, declined to comment and its CEO Mark Donnelly did not respond to requests for comment. 

Mike Rose Photographer: Lisa Maree Williams/Bloomberg

More than 280 million people are estimated to live outside the country of their birth, and the number is expected to rise as more workers seek opportunities overseas, often leaving behind retirement plans. 

While many leave those plans in place until they return or quit working, workers who know they’re not moving back or those who started careers overseas may choose to transfer their pensions. Some may want to simplify their retirement plans after living in multiple countries and joining several schemes, and see tax advantages to doing so.

Little data exists on the pension transfer business but in the UK alone, more than 2.8 million pensions were sitting unclaimed in 2022, worth about £26.6 billion ($34 billion), according to The Pensions Policy Institute. 

“People build up a little pension pot in whatever jurisdiction that may be, and then they either have no idea what to do with it or how they can get it, or even how they can access information on it once enough time passes,” said Jarrad Brown, a senior financial planner with Global Financial Consultants in Singapore, who specializes in advising expats.  

For those trying to relocate their pensions, out-of-sync tax regimes are among the biggest problems. UK retirement savings are usually taxed on withdrawal but contributions throughout a worker’s career aren’t, while the reverse typically happens in Australia. Holders of 401(k) plans in the US may incur a tax liability for moving their pension internationally, as well as an early withdrawal fee. 

Offshore advisors, often based in locations such as Dubai, Hong Kong and Singapore, say they will help people navigate byzantine laws and minimize punitive tax payments. They also offer to consolidate and manage funds left behind in other countries.  Many market their services via cold-calling or social networking sites. In cities like Hong Kong, agents are also known to approach prospective clients at popular expat hangouts such as golf and tennis clubs. 

Typically, such investment platforms are based in low-tax locations such as the Isle of Man, Gibraltar and Malta. The common pitch: let us help you switch your dormant pension in another country to our investment platform, and we’ll make you better returns with lower tax. 

Such investments, however, can be slowly whittled away by high commissions and fees, with owners sometimes not noticing for years that their nest egg is being depleted. 

In some cases, clients say they’ve been missold complex financial products that aren’t intended for retail investors, or their money put in unsuitable investments. A class action is underway in the Isle of Man alleging companies including Friends Provident International missold high-risk products, without doing due diligence, to expats transferring their pensions. The claimant is seeking compensation for an alleged £200 million of losses.

Friends Provident International told Bloomberg the legal claim “misrepresents the product and associated services” it offered, and that policyholders and advisers were free to choose investments. “While we are sorry people have lost money as a result of their investment choices and sympathize with their predicament, we are confident in our position and are strongly resisting the claim,” it said in an emailed statement. A judgment is expected to be handed down later this year. 

Bypassing advisors isn’t easy, with many finding the paperwork too burdensome to tackle on their own and tax laws and treaties too complicated to figure out. Some say it can take months or even years of frustration to move pension plans.  

“My sense is the best thing to do is wait to retire and then collect my various checks around the world,” said 40-year-old software engineer Wendi Li, who’s from the US but has been living and working abroad since 2008 in several countries in Asia and Europe.

Yet doing nothing until retirement isn’t a solution for everyone. Expats may face tax implications down the line or penalties for not disclosing income. Simply keeping track of foreign pensions can be a laborious task, as funds undergo mergers or name changes. Some people simply forget their passwords and get locked out of their accounts. 

Rose, who moved to Australia in 1997, built up multiple pensions throughout a career working for global tech firms including NEC Corp. and Cisco Systems Inc. He says he attempted to transfer the last two of his four UK pensions to Australia by himself. 

Rose at his home in June. Photographer: Lisa Maree Williams/Bloomberg

He completed at least 20 forms and sent another 100 pages of information to the British pension, without success, he says. Now, his Brite Advisors account is frozen and he’s not sure when he can finish moving the remaining £90,000 of his pension savings to his adopted country.

Paul Gallagher, an Irish-born chemical engineer living near Boston, says he realized that he needed to report his UK pensions as foreign assets when he began to think about retirement.

Having worked in the UK for 12 years, he had three pensions in the UK. Now 63, he says he found there was little clear guidance on how to report these plans in US tax returns. He eventually combined his pensions and transferred them to the US with the help of an advisor and a lawyer, a process he said was long and costly. “It was stressful,” he said. 

Global regulators probing Brite are casting a light on what’s long been an opaque corner of personal finance. In Australia, liquidators are wading through a web of cash-wired transactions that stretch across the globe. 

The US unit’s customers were mostly UK expats in the US, who initially paid Brite a one-off transfer cost followed by an annual fee of 1% of assets, according to the SEC. In its 31-page complaint, the regulator said loans secured by client assets were a primary source of funding for its operating expenses and that this was not disclosed. Brite has not yet responded to the complaints in the US or Australian court cases. 

More recently, one of Brite’s creditors, Heritage Management Consultancy, filed a winding-up petition against its Hong Kong business. Court documents are not publicly available. 

While there are reputable players in the pensions transfers sector, the cross-border nature of the financial activity means that companies can fall beyond the reach of regulators, industry officials say. Once a person transfers money outside a particular jurisdiction there is little the authorities there can do to help, and cases tend to fall between the cracks.

Margaret Snowdon from the UK Pensions Advice Taskforce, an industry-wide group aiming to improve consumer protection, said one of the issues with offshore pension transfer advisors was the multiple and unexpected fees that can add up and drain the value of retirement savings. She also said that officials have gradually realized it’s a global issue rather than one limited to British workers overseas. 

“We thought it was a UK-specific problem, but over time we began to realize it wasn’t at all. We discovered that there’s a complicated international picture,” said Snowdon. 

The UK’s Financial Conduct Authority did not respond to multiple requests for an interview, while the SEC directed Bloomberg’s inquiries about Brite to the FCA. 

“Pension schemes themselves are responsible for carrying out due diligence on transfers to other pensions schemes and ensuring they comply with the requirements placed upon them,” a spokesperson for HM Revenue & Customs said in an email.

Niall Coburn, a former corporate investigator and senior lawyer at ASIC and now principal at Coburn Corporate Intelligence in Brisbane, is spearheading the case involving more than 2,000 international claimants in the class action against Friends Provident International and others. They allege the products in question were only suitable to be sold to professional, rather than retail, investors. London law firm Signature Litigation LLP is leading the case.

“This case shows serious international regulatory gaps to protect elderly and vulnerable investors internationally,” Coburn said. 

Experts say the cases underscore the need for expats to better guard their retirement plans and to be wary of high-risk strategies. But people like Rose say they wouldn’t have become involved with companies such as Brite Advisors in the first place if there were clearer guidelines for expats wanting to shift their investments.

“It’s just a very frustrating process,” he said. “At the end of the day, it’s your money and people don’t give you access to it, either by malfeasance or a court case, even if it actually belongs to you.”

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