An admission by two major UK public pension schemes that they wrongly advised thousands of immigrating clients has reignited the controversy over advice for immigrants to Australia under British pension (superannuation) schemes.
The National Health Service Pension Scheme and the Teacher Pension Scheme have said they were unaware of changes to legislation in which they advised migrating members to leave behind an element of their pension within the British system.
However under local taxation laws and Foreign Investment Funds (FIF) rulings, this triggers a capital gains tax liability for many of those choosing to immigrate to Australia.
Montfort International managing director Geraint Davies says the admission still doesn’t take into account the cost to those wrongly advised.
“These employer schemes have admitted fault in giving pension advice but how much will this error cost? There are substantial costs involved for immigrants as well as the tax bills, and it is difficult to judge these expenses until each case has been examined,” Davies says.
“If immigrants had been given the true facts at the time and made aware of the other options to explore, we believe many different decisions would have been made and avoided, in may cases, a bucket load of tax.”
According to Davies, about 500,000 Australians may be liable for unknown tax bill as a result of being linked to pension funds in the UK coming under local capital gains tax laws.
He says more then a million people in Australia where born in the UK with official figures placing British immigration numbers to Australia at 10,000 people per annum.
However, he says the impact of the error is widespread and extends beyond immigrants but also includes those who have left the UK, those who have yet to leave and Australian nationals who have worked in the UK at some time.
Montfort says the extreme nature of the error and costs involved would likely lead to change in legislation while reports from the UK say the giving of wrongful advice has already lead to a number of court cases in that country. However it was unclear if pension holders would receive compensation from the government.
Commissions stay
The widely predicted shift from commissions to fees has not surfaced, according to a new report on compensation trends within the US financial planning industry.
While there has been a modest swing to fee-based compensation, a report by the Financial Planning Association (FPA) in the US has found that most financial planning professionals still receive commissions as part of their total compensation. A complete transition to fee-based compensation within the industry is not on the immediate horizon, the report concludes. While the various studies suggest that consumers prefer more fee-based financial services and professionals expect to earn more of their compensation from fees, a significant shift over the next few years would come as a surprise.
Mega merger talks
German banks Dresdner Bank and Commerzbank plan to continue talks about a possible merger that, if successful, will create Europe’s second-largest bank with US$731 billion in assets.
The Frankfurt-based banks are currently at loggerheads about merger conditions with their biggest shareholders, insurers Allianz and Assicurazioni Generali and investment fund Cobra.
Cobra says Commerzbank, which it has a significant stake in, would prefer to merge with a rival company outside Germany instead of Dresdner. Union representatives on Commerzbank’s supervisory board also oppose the plans to merge.
The merger talks between the banks started after the breakdown in talks over a $US28.5 billion takeover by Deutsche Bank in April and after Cobra, run by a former Dresdner executive, revealed its stake in Commerzbank.
FPA chief resigns
US Financial Planning Association co-executive director David Brand has resigned and will leave the top job by the end of the year. Brand shared executive director duties with Janet McCallen. Brand’s resignation comes as the CFP Board in the US searches for a chief executive, however Brand says his decision to leave the FPA is not linked to any ambitions with the CFP Board. The FPAhas 29,000 members and was created at the start of this year when the Institute of Certified Financial Planners and the International Association for Financial Planning merged.
Invesco awarded
Invesco has been named the funds management group of the year by UK-based Investment Week. On top of the gong for the best funds management group, Invesco European equities chief Rory Powe was named European fund manager of the year.
Alternative CFP?
Yet another financial planning designation is about to be rolled out in the US; this time being awardrded to financail planners who only charge fees for their services. The National Association of Personal Financial Advisors (NAPFA) is to unveil the yet to be named designation next month.
‘Fee-only’ fakes?
According to Bloomberg, there has been a influx of adviser groups in the United States falsely calling themselves ‘fee-only’ when in many cases they are not.
The NAPFA which has been operating since 1983 requires members to sign a fiduciary oath and vow that the best interest of their clients is a top priority.
NAPFA members must complete at least 60 hours of continuing education every two years.
In contrast, CFP licensees are required to complete 30 hours of continuing education every two years to retain the mark.
NAPFA expects to finalise the name of the new designation and its requirements in mid August.
