02/06/2025
SOME PUBLICITY BUT NOT ALL ACCURATE. WORKING ON THIS WITH FORSTERS:
https://www.professionaladviser.com/news-analysis/4414268/qrops-class-actions-frustrated-uk-expat-investors?utm_campaign=Professional%20Adviser%20Newsletters&utm_medium=email&_hsenc=p2ANqtz-8MRQRo_3uRlE_EbFHmvuUMtvBVvxrTxZIKgzdsmBoWkG7YNFo8BI1Pj6_VpPC05LJFygfDPO69K4RB-G4_6fPZWPR2bw&_hsmi=110688454&utm_content=110688454&utm_source=hs_email
Cases surrounding victims of alleged international pension fraud—centred around QROPS (Qualifying Recognised Overseas Pension Schemes)—have resulted in major class actions seeking hundreds of millions over the last decade in the Isle of Man (IoM), where one case has been awaiting judgment for more than a year.
Frustrated investors, including UK expats, have claimed that they lost millions due to "fraudulent and negligent" investment schemes involving unit-linked life assurance bonds.
These bonds were sold in Thailand, Indonesia, Cyprus, UAE, and the UK by unlicensed IFAs who run on commission, the cases claim.
Friends Provident International (FPI) and Utmost International, formerly Quilter International, are among those who have been slapped with class action cases.
To date, there has been no outcomes on many of these cases, and investors who feel mis-sold say they are still waiting for answers.
Meanwhile, campaigners have been pushing for broader QROPS reform, amid arguments that more should be done in the UK to warn investors and pensioners of potential pitfalls and scams.
A series of class actions
In 2020, a group of more than 700 UK and international investors launched a multi-million-pound claim against Utmost International and FPI in 2020. London-based litigation firm Signature Litigation and IoM-based firm Callin Wild brought this claim.
The funds in this case involved investors' losses connected to the LM Managed Performance Fund, Axiom Legal Financing Fund, and New Earth. All the above were linked to the collapse of LM Investment Management in 2016.
The £100m compensation battle was taken to Douglas High Court from 8 April to 23 May 2024. An outcome was originally expected in the weeks or months after the seven-week trial, but it is still unclear as to when the judgment may come.
The judge continues to consider the case, it is understood.
FPI is a subsidiary of IoM-headquartered International Financial Group Limited (IFGL). IFGL also encompasses RL360 Insurance Company, which faced a group claim launched in March this year over investments made through the company's products in the same now-collapsed funds involved in the Utmost and FPI cases.
In another even larger case, in 2023 a group of approximately 1,600 investors launched a £325m legal action of Man against Utmost International and FPI.
The legal proceedings from the investors began in early June 2023 and it was reported at the time that defence will be due in court during the summer.
In the most recent hearing by the IoM courts on 23 April this year, claimants sought to bind non-test claimants advised by the same brokers to outcomes in a test trial involving 20 selected claimants. However, the judge found that the pleadings and evidence were "insufficiently uniform" across all claimants.
The court is still in the process of determining test claimants and has not yet established whether common factual issues across all adviser-brokers exist. While adviser-brokers are one focal point of the litigation, no firm has yet been publicly named in this ruling.
PA understands that the next hearing is a case management hearing, currently due to take place on 18 September.
Insurers respond
On the class actions, a spokesperson for Utmost International told PA: "Utmost International does not consider the claims to have any merit and is robustly defending the cases.
"The provision of good customer outcomes is central to Utmost International's strategy, and we take our obligations to clients very seriously."
Professional Adviser has also reached out to Friends Provident and IFGL for comment.
Running on commission
Unlike like in the UK, financial advisers in the IoM still operate on commission.
Advisers can be compensated through various means, including commission on product sales, asset-based fees, or hourly fees. While commission-based advisers are paid a percentage of the product they sell, asset-based fees are charged as a percentage of the client's assets under management, and hourly fees are charged for the time spent on advice.
However, IoM-based IFAs stressed to PA that to their knowledge the cases largely involved non-IoM IFAs.
"As far as I am aware these cases were in the main sold by non-Isle of Man IFAs (for example based in the middle east), to non-IoM resident expat clients, and not by IOM regulated advice firms," Sharon Sutton, former Chartered financial planner at Thornton Chartered Financial Planners and past Personal Finance Society president told PA via email.
These IFAs also run on commission and operate globally from locations outside the UK, placing business with IoM-based insurers.
The IoM Financial Services Authority (IoMFSA) regulates its financial advisers and requires them to disclose all fees and commissions to clients.
The IoMFSA told PA that it continues to monitor the progress of the class action lawsuits.
A spokesperson said: "As these are active and ongoing matters, it would be inappropriate for the Authority to provide any further comment at this time.
"It should also be noted that the Authority is not a party to these proceedings and is therefore not in a position to offer any commentary about the claims or any associated matters. The Authority will have regard to any court judgements once published."
For nearly a decade now, investors involved in the IoM class actions mentioned have been seeking justice they believe they are owed.
With the decisions now in the hands of the courts, only time will tell the outcome.
‘Reform is needed'
The Isle of Man cases come as campaigners have ramped up scrutiny on historic QROPS transfers and how regulators look at non-UK and unregulated advisers more broadly.
Speaking widely, Academy of Life Planning founder Steve Conley told PA that he believes that a commission-based model operating has been a "significant root cause" behind expats losing out to "unsuitable" advice on QROPs.
"Commission structures inherently misalign adviser incentives with client outcomes, encouraging the promotion of products that serve the adviser and provider rather than the best interests of the investor," he said.
Conley continued: "In the context of QROPS pension transfers, this has often led to unsuitable recommendations — locking individuals into expensive, opaque, offshore bond structures with little regard for long-term client welfare.
"The high volume of such cases reflects systemic failings: a permissive regulatory environment, a reliance on conflicted remuneration, and a lack of meaningful consumer protection."
He stressed that "reform is needed".
"A transition to a transparent, fee-for-service advice model, stronger fiduciary duties, and far tighter regulatory oversight would better safeguard investors and rebuild trust. Without such change, history risks repeating itself," Conley added.
A consumer who has been affected by what she referred to as QROPs "commission-led scams" is campaigner Diane Bentley, who runs a Facebook campaign group with around 1,700 members for individuals who believe they have been victims of pension abuse.
Speaking to PA, she said: "People are losing comfortable retirements through QROPS commission-led scams that have taken on average about 12% of the pension fund on day one. The investments then fail to grow properly because there are so many ‘noses in the trough' - at worst the risky investments can fail, and the victim loses the lot. It is multinational companies that are enabling and facilitating the scam, we are not talking about small backstreet outfits.
"There is no redress, no compensation, and the victim is left with the only option being an expensive court case that few can afford."
Lack of provider due diligence?
Monfort managing director Geraint Davies recently attended a parliamentary investment fraud summit, addressing the issues of risky overseas investments and marked the launch the Investment Fraud Committee, a cross-party coalition aiming to "secure fair outcomes and long-term policy reform for victims".
Speaking on some QROPS issues faced by investors and pensioners broadly, he argued that the root cause is often the quality of the due diligence by providers.
"You design a product which allows sometimes two or three times the amount you may pay a UK adviser as remuneration, then you are surely going to do some checks on who is selling these products if they get such outrageous amounts?," he asked.
Davies continued: "Then you have the UK regulators who have naturally no jurisdiction over overseas advisers and providers, but they do over UK advisers and UK providers. So why haven't UK providers been instructed to issue warnings to customers about overseas advisers?
"It's always the root cause that needs to be looked at – else it will happen time and time again."
The Financial Conduct Authority (FCA) said that it does not have the direct power to prevent individuals or firms from using overseas advisers.
"If the use of overseas advisers poses a risk to consumers or violates UK regulations, we may intervene," the spokesperson said. "Particularly in cases involving cross-border financial services or where firms are not compliant with UK rules."
Cases surrounding victims of alleged international pension fraud—centred around QROPS (Qualifying Recognised Overseas Pension Schemes)—have resulted in major class actions seeking hundreds of millions over the last decade in the Isle of Man (IoM), where one case has been awaiting judgment for mo...
