Earlier this month, Old Mutual International (OMI) saw a sharp drop in sales of rops, which along with challenging economic conditions saw the insurance giant’s net client cash flows plummet by 33% in the first-half of 2016.
Although the company wouldn’t disclose a breakdown of sales, a spokesperson for OMI told International Adviser that the rops market is “levelling out” following the UK pension reforms, introduced last April giving people unrestricted access to their pension savings.
It comes despite Malta-based Rops provider STM reporting record sales in the pension transfer product after waiving its establishment fee in May.
OMI admitted that an increasing number of competitors in the sector, which has traditionally been dominated by the insurance giant and RL360°, had impacted its own sales.
"The requirement to obtain FCA advice on a transfer from a final salary scheme, which is by definition difficult for a non-resident of the UK, means it's more difficult to sell a transfer from a final salary scheme,”
“The Rops market is starting to mature, what was once a rapidly rising sector is now levelling out. We have also seen new players enter the rops market.
“The benefits of transferring to Rops for some clients has changed following the pension reforms, with some schemes not being able to offer full flexible access to funds,” he said.
OMI predicts that demand for Rops may rise following the Brexit vote as people look to “lock in the benefits of Rops” before the UK’s exit from the EU.
Death tax
As part of the reforms, the-then chancellor George Osborne abolished the so called ‘death tax’ for everyone who died while under the age of 75. Under the old rules, a beneficiary could only inherit the pension pot of someone who died and was taking an income drawdown by paying a 55% tax charge first.
OMI said the advantage of Rops, traditionally used to protect those living overseas from paying the death tax, has been “broadly neutralised by the pension reforms.”
Speaking to IA, John Batty of Isle of Man-based Boal & Co, an actuarial consultancy firm specialising in international pension schemes, agrees there has been a “maturing” of the market spurred on by new entrants and the pension freedoms.
