needs a letter to the editor on the state pension issues

[Michael Skully]

afr 13-14 july 2024

Expats’ savings at risk in maze of pension laws

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.

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 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-yearold dual British and Australian national living in Sydney, who says he has lost access to $285,000 of retirement savings with Brite.

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

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 a number of countries and joining several schemes.

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 are not, 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.

A class action is under way in the Isle of Man alleging that companies including Friends Provident International missold high-risk products, without doing due diligence, to expats transferring their pensions.

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.

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

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.

Global regulators probing Brite are casting a light on what has 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.

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 2000 international claimants in the class action against Friends Provident International and others.

‘‘This case shows serious international regulatory gaps to protect elderly and vulnerable investors internationally,’’ Mr 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. SI

ADDITIONAL REPORTING: KIUYAN WONG AND ALICE KANTOR. BLOOMBERG