Teachers’ Wealth: Are They Licensed To Operate In The UAE?

Recently, I joined a roundtable discussion at The National

We discussed the changes that the financial services industry needs to make. 

The insurers who provide the most commonly sold products (Zurich International, Generali Worldwide, Friends Provident International, RL360 and Hansard International) were invited to attend. But they declined. 

Two layers of problems exist in the UAE. First, many of the financial firms sell expensive offshore pension products.  The fees are so high that, after inflation, few investors make money, long-term.

Some of the roundtable’s attendees, however, were just as concerned about firms that aren’t licensed to operate in the UAE. 

In some cases, such firms are finding their way into schools and businesses.  Teachers’ Wealth might be such a firm.  I asked its representative if the firm was legally registered to do business in the UAE. 

He replied with a lengthy email. But he didn’t state that Teachers’ Wealth was legally regulated to do business in the region.  Instead, he referred to the importance of his firm’s membership in COBIS (Council Of British International Schools).

The Teachers’ Wealth representative stated: Although we take government regulation extremely seriously and it is a vital part of doing business in 2017, COBIS are far more important as they have global reach and have the power to end our reputation as an approved supplier overnight – effectively, we would therefore be out of business.”

To my knowledge, COBIS doesn’t serve as a financial services regulatory firm. 

I believed that a COBIS membership is earned through a form of payment, not through a regulatory screening process. 

As a source of regulatory credibility, I figured that membership in COBIS had as much merit as a plastic Sheriff’s Badge found in a box of cereal.

To be certain, I reached out to Colin Bell, the CEO of COBIS.  I asked if COBIS vetted financial firms for legal qualifications, pertaining to the jurisdictions that they operate. 

He said, “COBIS Supporting Membership does not imply endorsement by COBIS for any service, programme or activity.  He added that “an organisation may not use COBIS Supporting Membership as an endorsement of its services, products or activities.”

Mr. Bell’s statement, when coupled by the fact that Teachers’ Wealth hasn’t declared its legal regulation in the UAE, puts the firm on slippery ground.

I asked Sam Instone, CEO of AES International, why it’s important for a firm to be legally regulated to do business in a country that it operates in.

He said, “Just like practicing as a doctor, a dentist or a lawyer, it is illegal and hence a criminal offence in most countries to offer a restricted financial service without a license. Acting on the advice of an unlicensed doctor means you may get a wrong diagnosis and a wrong prescription.  If things go wrong you are unlikely to be able to complain fairly and they certainly won’t hold professional indemnity insurance.  Whilst not all licensed doctors or lawyers are good – the fact that they are qualified, subject to background checks, supervised and insured provides a minimum base level of protection and credibility.  The phrase ‘charlatan’ exists for a reason and this is what you get if you deal with an unlicensed adviser”

Many financial services firms, both regulated and non-regulated, have transferred UK Defined Benefit Pensions into QROPS.  Many of them used scare tactics and misinformation to convince clients to do this.  This is particularly shocking when they transfer government pensions.  Such is the case with teachers, nurses, the civil service or former military members.  Fortunately, the UK government put an end to former government employees cashing in their defined benefit pensions in favor of QROPS  (for future government funding reasons)

According to a HM Revenue and Customs Report, they will also levy a stiff tax on anyone who cashes in a UK defined benefit pension scheme in favour of a QROPS after March 9, 2017.

But why did so many teachers get convinced to cash in their pensions before they were stopped from doing so in 2015?

According to teachers I spoke to, expatriate financial salespeople told them they would lose 50 percent of their defined benefit pension assets if they kept the money in the UK  pension.  By taking the money early (and investing it in a QROPS) they would come out ahead. 

At least, that’s what they were told. The reality is different. 

In May 2013, The Daily Mail reported that government reforms would see teachers, doctors and nurses earning a 30 percent reduction in pensionable benefits. This would affect employees who are below the age of 50 on April 1, 2012. But anyone who says it constitutes a 50 percent reduction is tricking people with some pretty deceptive math.

Traditionally, with defined benefit pension schemes, workers earned a proportion of their final salary.  As the Daily Mail’s Adam Uren says:

 “Typically 1/60th, as income in retirement for every year they have worked with the organisation. So someone with 40 years service, who retired on a salary of £60,000, can expect a retirement income of £40,000.”

But with government money strained, the payout has been reduced to an average of pensionable earnings for each contribution year.

As the Daily Mail reports, that could reduce the payout by one-third.  But Britons pay tax on a laddered structure.  That means, one-third less pensionable income might constitute (depending on the individual’s  tax bracket) a 20 percent after-tax reduction in pensionable earnings.

This is nothing close to the 50 percent deduction that so many expatriate financial salespeople scared their clients with.  

I asked Simon Glazier what he thought of teachers cashing in their government pensions in favour of a QROPS scheme abroad.  The Chartered Financial Planner works for A+B Wealth. He also won the UK’s financial advisor of the year award in 2015.  

“A pension transfer of this type is effectively a transfer of risk, from the Government to the member.  For many people such a transfer of risk is unacceptable, especially where they do not have significant financial resources in addition to their pension scheme.  Moving money into a high charge, poorly regulated substitute pension, recommended by an ‘adviser’ who is incentivised to sell one to you, will almost always be a poor choice.”

Sam Instone says financial services representatives make large commissions quickly when they move a UK Defined Benefit Pension Scheme into a QROPs. 

Teachers are easy prey. Typically they aren’t sophisticated and don’t understand regulation or investments.  They get exposed to the vultures who can make a disproportionately large amount of hidden commission for offering their services to this market for ‘free.’”

Teachers can no longer cash in their Defined Benefit Pension Schemes in favor of a QROPS.  That’s a good thing, according to Sam Instone.

“Those [government] pensions schemes are guaranteed,” he says.  “Benefits might not be as strong as they used to be.  But they’re far more of a guarantee, and likely to be far more profitable, than most QROPS schemes.  That’s why authorized pension transfer specialists like AES International didn’t transfer teacher pensions into QROPS plans.  Doing so, in almost every single case, would not have been ethical.”

I reached out to many British international schools.  Most of the teachers I spoke to had been convinced to cash in their UK teacher’s pension scheme.

Next, I contacted UK-based financial advisor, Ben SherwoodHe joined Hillier Hopkins in 1997 and became a partner in 2002. He’s a Certified Financial Planner and Chartered Financial Planner for high net-worth clients. He also holds investment and taxation qualifications and he’s a co-author of The 7 Secrets of Money: the insider’s guide to personal investment success. 

Ben Sherwood was horrified to learn that many expats from the UK were convinced to cash in their teachers’ pensions in favour of QROPS schemes. Teachers’ Wealth suggests, on this site, that this has been an integral part of their business.  They state:

“Teachers’ Wealth was established to fill a gap in the international schools market to provide both dedicated and trusted financial advisory services to international schools and their staff worldwide. Dealing only with the international education sector and their very specific needs, Teachers’ Wealth assist staff to transfer their frozen UK pensions to offshore HMRC recognised Qualifying Recognised Overseas Pensions Schemes (QROPS)”

Ben Sherwood argues that Teachers’ Wealth shouldn’t have done this:

“The idea that most teachers with rights under the UK Teachers Pension Scheme should transfer is simply scandalous.”  He added that transferring to a QROPS rarely makes sense.  “The right QROPS can be the right answer for the right client in the right circumstances. But in our experience the likelihood of these stars aligning is very rare.”

To clarify, he added that a low-cost QROPS might make sense for a very wealthy individual if they choose to retire outside of the UK. 

Unfortunately, teachers don’t usually fit into such rare case examples. 

Sadly, commission-hungry salespeople have convinced many British teachers to cash in their defined benefit pensions.  To a hammer, everything is a nail. 

Teachers shouldn’t invest with such advisors. That goes double if the firm isn’t regulated.

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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20 Responses

  1. Brian says:

    Very surprised to read some comments on here, given who Teachers Wealth used to operate with when they sold the idea of cashing gold plated DB schemes to teachers.

  2. Phil says:

    The outfit is run by someone living in Prague. According to the UK company register, he is from Formby near Liverpool and has had a string of dissolved business with his father.

    CAVEAT EMPTOR…..

    • Phil, I just edited the piece, adding that their QROPS establishment (selling UK teachers’ defined benefit pension plans to do so) was a main part of their business.

      Cheers,
      Andrew

      • Phil says:

        I know a guy that was sold a pension cashback by this adviser. It went badly wrong, the fund has pretty much gone and he is getting huge tax bills from the Inland Revenue as well as being forced to repay the money he has not got amymore. He was convinced to buy it as the adviser was working some guy in Spain that worked with a respected international adviser firm and now he faces total ruin.

  3. May says:

    Phil is clearly referring to Tim Cox of Star Capital – who was working with Stephen Ward on pension busting

  4. May says:

    A bit more Googling turns this up https://issuu.com/girlinspain/docs/small_south_573 (go to page 23). Stephen Ward, pension buster, and Star Capital http://www.scfinance.cz/ – read the text and note same logo

    • Brian says:

      You spotted it to, I refer to my first comment.

      • May says:

        Ward’s Premier Pension Solutions was a tied agent of another firm at the height of his pension busting wasn’t it?

        • IFA says:

          I assume you have read the article that you yourself posting above. In that article, Ward stated he was an authorised and regulated agent of AES International.

          Given the comments in Mr Hallam’s article, I find this a little odd to say the least.

  5. Dennis says:

    Teachers Wealth also operate in S.E. Asia with international schools and they are, or were, also members of the FOBISIA – Federation of British International Schools in Asia – http://www.fobisia.org

  6. IFA says:

    I note the comments by Ben Sherwood, it would be a brave ( foolhardy??? ) man that decided to transfer to a QROPS after Hammond’s sledgehammer attack. A well-aimed attack at these tinpot outfits that probably think that Ethics is a county next to London.

    I hope the schools are reading this and take note.

  7. Elese says:

    I am an American teacher living in the UAE. Is there a firm licensed in the UAE that you would suggest? I have heard different things about working with a firm based in America.

  8. Chris says:

    Hi Andrew.
    I am one of the many fools who got tricked into transferring my U.K. pension to a QROPS some 9-10 years ago. I’m a UK expat living in Dubai. The scheming rep was from Global Eye here in Dubai. Of course the money was invested in to markets in Asia at the time.
    , I.e Thailand and Indonesia with nothing in any U.K. or European funds or indexes. The pension lost approx 20% in value over the next few years and I never saw the rep again. Soon after some other rep also from Global Eye came to “fix” the damage and put all the money into a U.K student accommodation fund. Never saw that rep again either afterwards. Third rep told me this particular fund had been closed down and the money would be extremely hard to recoup but he had contacts so would do his best. Long story short he claims he recovered the money that was left, approx £78,000 and put it all into cautious Generali funds, whatever that means? He stated that the money could not be touched until I’m 55 years old (47 now) and then only 50% of it can be taken out, with the rest remaining forever. Told me this is the rule as it’s linked to U.K. pension regulations or something like that. Now, my question. Is this really the case that I cannot decide myself whether I want to take out all my money now and then re invest it in low cost index funds as per your suggestions in your book? Worst case scenario, would I be able to at least take the money against paying a percentage fee to the broker/ Generali? I have put no money whatsoever in to the funds since the very beginning. It was purely a transfer. I feel utterly helpless as I really do not know where I stand on this legally here in the UAE. And I honestly have no idea how the investment is currently performing. Please help.
    Chris

    • Hi Chris,

      First of all, don’t blame yourself. These guys could talk the fur off a dog. I’m so sorry to hear that this happened to you.

      In part, the salesperson is right. This money must now remain in a QROPS structure until you reach a certain age. Because it was placed into a QROPS, you can no longer manage it yourself. That’s the disappointing part.

      That said, there is one option. The QROPS can be transferred to another firm that would invest it in a portfolio of index funds. But here’s the downside. That firm will likely take another percentage for the transfer. I think it’s about 5 percent.

      But leaving it where it is will cost much more, in the long run.

      If you do want to transfer it to another firm, the only one in the region that will charge reasonable fees for a QROPS transfer is AES International. They’ll build you a diversified portfolio of index funds, taking a one-time lump sum of about 5% to make the transfer.

      Again, I’m so sorry to hear that this happened to you.

      I’m not sure if you have read my book, but it shows how to effectively invest your other savings (at even lower costs). Here’s the link:https://www.amazon.co.uk/Millionaire-Expat-Wealth-Living-Overseas-ebook/dp/B078TR1FLP/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1517557374&sr=8-1

      Cheers,
      Andrew

  9. Chris says:

    Hi Andrew.
    Thank you so much for your swift reply. I will get in touch with AES International to help me with the transfer. Would that 5% be taken off my remaining pension balance or would I need to pay the money on top?
    I have read both of your books and I have recently started investing in index funds through Internaxx. Aiming for a 60/40 split index funds/ bonds. The index funds are VUKE and VWRL and the bonds are UK Gilts as you suggested in your book. As of now I am only able to buy every quarter or so, but I hope that I can still manage to achieve your average predicted returns until my retirement in 17 years time. Is there a minimum amount of investment total/value that I need to achieve before I start the once a year balancing? I also attended your forum here in Dubai last week. Unfortunately I wasn’t able to stay on until the end to ask questions as I had an early start next morning. Btw, your new edition of the Millionaire Expat book is already sold out in the bookstores here. I have put in an order for a copy when the next delivery arrives. I am very grateful for all your hard work in trying to educate the population on such an important topic. I only wish I had come across this info years ago! I feel as time is running out for me to be able to build an acceptable pension pot. Compounding certainly benefiting those with time as you’ve shown so clearly in your work. Once again thank you very much!

    Kind regards
    Chris

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