Pension investment in overseas property

I am aware as a practicing IFA in Llanelli of some serious, possibly misleading advice being offered to pension savers who risk losing all of their pension savings.

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.

Our short guide to Annuities

It takes many years of planning, saving and sacrifice to build up a significant pension – and, after all those years, you want to be sure you are making the most of it.

However, as you near retirement, your pension company will send you a variety of options to choose from.  Many of my clients find the choice a bit daunting, as they do not understand the choices and declarations that need to be signed.

There are alternatives to annuities, such as income drawdown, asset backed or short-term annuities.  It is usual that the pack that you receive will only provide a choice on straightforward annuity purchase, which is not always the best for everyone.

All pension providers must now recommend that you seek independent financial advice when they send you your annuity pack, quoting the ‘open market option‘.  I would comfortably state that whenever we  provide annuity advice, we are usually able to shape the annuity to suit your circumstances and obtain a higher income using the open market option.

The choices you usually get are:

  • Taking a tax free cash lump sum.
  • Purchasing a spouse’s/civil partner’s pension.
  • Inflation proofing the annuity.
  • Building in a guaranteed period.
The choices you usually do not get are:
  • Building in capital/value protection.
  • Basing the annuity on your personal/spouse’s health situation.
  • Taking into account your smoking/lifestyle circumstances.
  • Choosing an asset-backed annuity.
  • Including overlap (where the annuity continues through the guarantee period AND a spouse’s pension is paid)

Our downloadable annuity guide* is designed to provide you with the basic information you need to start thinking about your retirement opportunities. It cannot make any recommendations or decisions for you but, armed with the information it provides, you can start to ask questions and, with our help, make sure your retirement is as well-funded as possible.

Alternatively, if you require independent financial advice on retirement income options, feel free to call on 01554 770022 and we can arrange a no obligation appointment.

*Brochure provided courtesy of

Trivial pension lump sum – take care!

When you reach age 60, it may be possible to withdraw your pension as a trivial lump sum.  That is, you can take the whole lot out in one go.

However, care needs to be exercised with this, as you need to be sure you are allowed to take the pension in one lump sum.

Here’s a specific example of a client who I met this week….

My client visited me to get my advice on how to fill in the forms to take out the pension in one go.  They had read that if you have a pension pot of less than £18,000 that you could withdraw the whole sum, having 25% paid as tax free cash, and the rest is added to other income for the tax year and taxed at your highest marginal tax rate.

All the paperwork was in hand, some of it filled out already before we met.  We started discussing their circumstances and I quickly identified that my client was already in receipt of an occupational pension of £8,000 per annum.

Unfortunately for my client, I advised they were not allowed to withdraw the pension under triviality rules, due to having other pension funds which also need to be included when calculating eligibility for a trivial lump sum.  The £8,000 pension must also be valued and included in the calculation (the £8,000 pension was valued at £200,000 for the purposes of the calculation!) .  For this client, we have to look at an alternative way of drawing the pension income, but they are still able to take 25% of the fund as tax free cash.

Had my client not taken my advice, they may have faced a HMRC penalty of up to £3,000 for negligently or fraudulently obtaining an unauthorised pension payment.

Therefore, it pays to take expert financial advice.

Jeremy Phelps is a Chartered Financial Planner at Financial Solutions Wales.  If you would like advice on taking your pension as a trivial lump sum, we can assist and take care of all the paperwork on your behalf.  Our fee for this is usually £199.

Don’t lose out in retirement

As you head towards retiremCouple seeking retirement annuity pensionent, you spend a lot of time thinking about what you can do. It’s time to please yourself – work part time, take on a personal project, tour the world or, without any guilt, do absolutely nothing. It’s taken you a lifetime to get here so giving it a bit of thought is very satisfying.

However, a recent report from the National Association of Pension Funds found that many people do not include their finances in these thoughts. As a result, pensioners are missing out on as much as £1 billion in potential income1.

It all looks so simple

If you have been saving into a pension, either with your employer or on your own, you will likely get an offer from the insurance company or pension provider just before (they think) you are due to retire. This will quote an income which they guarantee to pay you in exchange for your hard earned savings. It will all look very easy –sign on the dotted line and everything is sorted out for you.

However, the NAPF’s report suggests that taking this offer could cost you dearly. You could end up settling for an income which, had you spent a little time checking the competition, could have been significantly increased by another provider.

Take every penny

There are many different options available at retirement and lots of providers fighting to get your business. With the competition so fierce, it is essential that you check every offer to find the most suitable solution and maximise the income you receive.

It is the lack of action which has led the NAPF to conclude that pensioners are losing £1 billion.

Their advice is therefore, shop around. Not only does this allow you to seek out better offers, it also gives you the chance to consider different factors. Inflation, for example, and health. The Association of British Insurers2 suggest that as many as 49% of people have lifestyle issues (eg: smoking, high blood pressure) or suffer from health conditions (eg: cancer, diabetes) which could increase the income they receive even further. Sadly, only 13% actually do anything about it.

You have nothing to lose

Our retirement review service is designed specifically to help you to make the right choice – and maximise the income you receive.

We take a detailed look at who you are, what plans you have and what can be done – and then seek out the best solution for you.

If you would like more information, call our office on 01554 770022 and we can discuss the benefits, without any obligation on your part. It will take only a few minutes – but could end up adding hundreds of pounds to your income just when you finally have the time to enjoy it.

1: NAPF/Pensions Institute, ‘Treating DC members fairly in retirement’ Feb 2012;

2: Association of British Insurers, ‘Annuity Purchasing Behaviour’, Sept 2010

Financial Advice is NOT free.

Retail Distribution Review (RDR for short) – a huge shift in financial services, and I for one think it is for the better.  It comes into effect in January 2013, but it’s started now.

Yesterday, I attended a RDR conference, covering subjects such as VAT, adviser charging, and positioning my proposition to my clients.  There are objectors to the change and others, like my firm – Financial Solutions Wales, who are embracing the change.  My firm is well positioned to provide advice to our clients well into the future.  Both advisers are suitably qualified to provide advice for the future, and I have gained Chartered Financial Planner status. (the Personal Finance Society describe Chartered Financial Planner as ‘the pinnacle for the financial planning professional’).

I feel more comfortable dealing with clients who understand that financial advice is not ‘free’.  Any adviser, like those at your bank, independent advisers, tied agents do not provide free advice, they must get paid!  This has traditionally been through commission, where the product provider sets the payment levels, advisers choose how much they would like from that offered by the firm he/she places the business with.  I like to agree all fees up front, it’s fairer to you – my client.  I met a potential client last week, who was offered a solution from another adviser, and  she was shocked to see the charge was £9000!  You won’t be surprised to understand that she asked me how much I’d charge for the same work – around a quarter of what she was quoted by the other adviser, agreed up front with our firm, delivering a proposition to meet her needs now and in the future.

As an independent financial adviser (IFA) I offer a professional service to my clients, often matching their needs with solutions available.  I have calculated the amount of time spent on providing advice is around 10 hours on average.  My clients see me for around 1/4 of that time, usually an initial meeting and then when I provide my recommendation.  Often, to ensure that they are comfortable with my recommendation, we may add another meeting or two.  ‘Behind the scenes’, I prepare for appointments, telephone providers, design solutions, research products, complete applications and follow up the application until it is in place.

This takes a considerable amount of time.

I must say that I agree that some people will be priced out of taking advice, because as I say before, it is rarely ‘free’.  However, I look forward to taking on those clients who value my services, and feel content with the solutions I provide.