HANG ON DOMINIC, I HAVE A SIPP, SHOULD I WORRY?

Do we move pensions to SIPPs? Yes, often! Because they can be brilliant, cheap to run and offer a vast range of REGULATED retail funds for us to use to grow your money. Some are more expensive than others, but our job is to select one that is suitable for you (if it works, cost effective, value for money, provider financially robust etc). Our fee structure is easy to understand 1% a year.

What rip off advisers do is charge the SIPP all sorts of fees and pick “funds” (not regulated ones) that pay them additonal “fees” as well. The driving motivation is to fleece the investor, not to make good investment decisions, but to take as much money out of your pension for themselves. Let’s call a spade a spade.

TIME FOR A CELEBRATORY DRINK

I am delighted, with the news that these criminals have been caught! I may even pour myself a drink before noon to celebrate. Sadly, it will likely take years to attempt to get money back to investors, most of it won’t be returned, it will leave many in dire straits for their own retirement plans and all of them will understandably think all advisers are untrustworthy and so continue to perpetuate the story that investing is bad, advisers are bad, pensions are bad, the stockmarket is bad… yet it is precisely because they didnt use a proper adviser, or a proper investment that its ended up like this. Very sad, wont help encourage people to save, more likely to cause the reverse!

NOT SOPHISTICATED INVESTORS

Something like 2,000 investors were persuaded to move their pensions into a SIPP and then placed the money into “alternative assets” such as tree plantations, hot pods and property in Brazil. Something like £92m was moved into these “assets”. That’s actually a low average pension size of about £46,000 – so these 2,000 people hadn’t saved much either, it probably was their life savings in pensions. So, whilst I risk generalising, these are not sophisticated investors, they are precisely the opposite and less able to tell a investment duck from a swan.

There is more to it than this (see the links at the bottom) but suffice to say the FCA are now ready to deal with the company, its Directors and will attempt to get client money back. Here I have to admit to cynicism, as £92m will almost certainly never get returned, I imagine 10% of it is more likely.  The Directors of Avacade and Alexandra Associates have already been ordered to pay £10.7m in restitution to investors (averaging £5,300 to each investor). Somehow I suspect to hear “ we don’t have the money, its been spent on legal fees, defending the indefensible, and a Ferrari or two…. Oh and the company is now bust”.

So if you have a friend that has ever had any contact with Alexandra Associates (UK) Ltd, or Avacade Future Solutions (AA) or Craig and Lee Lummis, please urge them to get in touch with the FCA. In truth you probably don’t, because £46,000 in a pension fund is not likely to be the sort of friend you have unless they are quite young.

Well done FCA, very glad to see another one caught. I do however wish you would name and shame the SIPP providers that not simply allowed, but facilitated this to happen.

EVIDENCE & LINKS

• High Court orders illegal pension introducers Avacade, Alexandra Associates and their directors to pay £10,715,000 restitution to consumers
• High Court finds against illegal pension introducers, Avacade and others 
• Court of Appeal judgment 
• Find out how to report an unauthorised firm

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk