On Wednesday,7th January the Malta Financial Services Authority (MFSA), the Maltese regulator, issued new and amended rules relating to pension schemes, pensions funds, their administrators and third-party service providers.
This comes after the MFSA elected five new governors. The MFSA had been criticized recently for not stepping into the Maltese Cross affair which resulted in the loss of €6 million in clients’ investments. Now, the new governors are stepping up to the plate and have tightened regulations.
They will kickstart a new consumer protection campaign in Malta which will include an enhanced institutional framework, an improved regulatory framework and a strengthened enforcement regime.
New Malta Rules to Allow UK Style Pension Freedoms
The new rules mean that pensioners can now invest in wherever they want and mange it themselves. Self-managed QROPS are here. Furthermore, they can buy commercial property and get a 50% loan, although residential property investments are still disallowed. The retirement age has been boosted to 75 years old.
Malta has been tightening up their financial regulations to comply with the new UK pension freedoms which are being enforced on April 6th, 2015.
First Malta tightened up the regulations on which financial firms could operate currency exchange operations in Malta, increasing the capital requirements.
Now, they are taking aim at unregulated firms and advisers.
MSFA Takes Aim at Unregulated Advisers
Amongst the key changes, which are still subject to the issue of detailed guidance notes, are:
- Retirement Benefits which come from the “programmed withdrawal” scheme from Defined Contribution Schemes (final salary company pension schemes) will be limited to schemes that do not have QROPS status. The change removes the ability of Pension Trustees to liberally interpret the previous rules. This may mean that some current schemes may need to de-register under QROPS and create new schemes.
- Investment freedoms introduced. Self-directed pension schemes by members will now be allowed, together with the ability to buy UK commercial property and gear it up to a reasonable level (50%).
- Regulation of advisers and investment managers has increased. The notes suggest that there will be a need for pension trustees to deal with advisers who are regulated up to a standard satisfactory and acceptable to the MFSA. Likewise, Investment Managers or Discretionary Fund Managers will need to be regulated in Malta or more relevant, have to be passported into Malta
- The retirement age has increased to at the latest 75 years of age.
- There are also some procedural changes. There are some changes proposed relating to the need for Members to provide certain documents such as ‘deeds of adherence’ and ‘investment instructions’. In other words, more paperwork for advisers and clients.
My take away from this for financial advisers:
(1) Financial advisers in unregulated countries may not be able to give advice on Malta QROPS soon.
(2) Self-managed Malta QROPS will become more available. Commercial real estate projects will target members of Maltese QROPS.
(3) Application forms will change and extra forms may be needed for those that are submitted.
Please write to us if you are considering transferring your pension to Malta.
Malta QROPS to Allow Self-Managed QROPS and UK Pension Freedoms by Richard Malpass