This blog has been inspired after listening to the BBC Moneybox programme of 24th July, titled ‘Pension scams under investigation’. I urge anyone offered a scheme of the type I describe below to listen to the programme or download the transcript.
My concerns are described as follows:
Earlier this year a new client approached our firm, saying that he had attended a local business club dinner and been approached by someone (not a regulated financial adviser) who offered ‘free pension reviews’, with a view to moving the fund to a Self Invested Personal Pension (SIPP), which allegedly offer some fantastic, guaranteed rates of return of 8-9% per annum.
The offer certainly looks attractive, and I could not contain my clients enthusiasm, although I was immediately on my guard, by such an offer of a guarantee.
However, he had come to my firm for a second opinion. You’d think he must be suspicious?
We reviewed his needs, and they were basically as follows:
- He is aged late 50’s
- He has circa £100,000 in his personal pension
- He has a low (cautious) attitude to investment risk
- He needs the income to start around age 62 (around 6 years away).
- His pension is presently invested in fixed interest and equity based funds with a well known pension provider.
Following a comprehensive fact find, my advice was to stick with his existing pension, but review the funds due to his cautious attitude to risk. We would charge him a nominal fee for our time and advice on this matter.
The client asked for our opinion on the SIPP (with guarantees), that he had been offered. Upon investigation, the investment was to be made into Barbados properties. It was through an unregulated investment, which basically means that there is no Financial Services Compensation Scheme protection, and is in a scheme which is on the radar of FSA officials who are concerned with transactions of this type. Click the link here, for what the FSA say about these types of schemes.
My advice to the potential client was that the SIPP scheme offered did not match his risk profile, timescale for investment and need for income in the future. In my honest opinion, it is quite possible he could lose all of his £100,000 pension fund, or at the very least, find it incredibly difficult to liquidate his pension when the time comes to start taking an income in the future.
The client had been made aware of my concerns, but had gone ahead with the SIPP investment anyway!
If you have been offered a similar scheme, please be cautious. If it seems too good to be true, it probably is!
I would like to point out that this article is based on all the information presented to me by the client, and the research I undertook on his behalf. It is my professional opinion on the matter, and I would be more than happy to discuss any similar offers.
If you need advice on this matter, please give me a call on 01554 770022, and I will explain how I may be able to offer professional independent financial advice.