What major changes to Malta QROPS law will mean to you here in Spain.

By Sam Kelly

Managing Partner & Financial Planner

s.kelly@chorusfinancial.es +34 664 398 702

Malta has grown to become one of the financial centres of the World over the last decade and is very well known amongst the British population as the mainstay for a popular type of pension called a QROPS (Qualified Recognised Overseas Pension Scheme).

QROPS in themselves have, however, had a chequered past, which sadly has affected many in our local population here on the Costa Blanca.

Chorus were one of the first companies in Spain to recognise that Malta had a particularly light touch when it came to the regulation of pensions, and we very publicly decided that we would favour UK based pensions rather than overseas pensions, to give our clients access to more robustly regulated options.

Maltese QROPS have, over the years, been used as a vehicle for financial advisors to recommend overpriced, high commission paying solutions which often place far too much unnecessary risk on their clients, in exchange for a fat paycheque at the end of the month for the advisor.

Well it seems all that is changing, as the Malta Financial Services Authority (MFSA) has carried out major reforms on how they regulate these products. These reforms will have a 2-fold effect for current and future plan-holders.

The first element is a strict requirement that your advisor must now fully disclose all commissions, fees, underlying investment fees and trail (when an investment fund pays the advisor a fee you don’t know about). Many of you have unwittingly signed into Maltese QROPS over the years which have paid huge sums of commission to your advisor, which led to a lot of advice being focussed on what the advisor will earn, rather than what is best for the member. With Malta QROPS, at least, those days are hopefully over (this doesn’t mean the same for many ‘Spanish Compliant Bonds, which despite being a very useful product are often overpriced or filled with low quality funds and on which such regulation does not yet apply).

The other crucial element is that Malta are now insisting your financial advisor is fully licensed to give you investment advice. That might sound like an obvious requirement, but many of you will be very surprised to learn that most investments recommended in Spain are done so under an insurance license, as many financial advisors here don’t even have the license required to give financial advice – the irony!

Chorus have already received lots of enquiries from people here in Spain who are confused as to why their financial advisor has been suddenly recommending a change of investment to a third-party investment company, or discretionary fund manager, for their Malta QROPS. The reasoning behind this has often been vague, so they have come to Chorus for a second opinion.

Well, the explanation is perhaps that your financial advisor does not hold an investment license and is using a third party to give you the actual investment advice. The issue with this is you’re going to end up paying effectively double for your advice each year – you’ll pay your financial advisor to do a bit of unlicensed admin for you, and you’ll pay this third party to do the job you thought you were paying your financial advisor for.

Thankfully Chorus have, and have always had, the full investment license here in Spain and the UK, so our clients are not affected by these changes. We can of course help those of you who currently have their QROPS managed elsewhere too.

Please do drop me an email on s.kelly@chorusfinancial.es, call me direct on +34 664 398 702 or complete the Contact Form on this page if you wish to discuss.

Contact Sam Kelly