Investors are being warned to be vigilant before transferring their pensions and investing in unregulated products, as law firm Hugh James takes on 300 cases of mis-sold self-invested personal pensions (Sipps).
The investors have seen the value of their Sipps fall from hundreds of thousands to little more than zero, after being advised to move their money into the ‘highly speculative’ Harlequin property investments.
In each case the investors were encouraged by unscrupulous independent financial advisers (IFAs) to transfer their workplace or private pension into the extremely high-risk investments. Victims were often cold-called and promised that returns would beat their existing investments.
Malcolm Evans, a partner at Hugh James explains: “The bulk of the cases involve transfers between 2009 and 2012 which were linked to highly speculative investments in Caribbean property developments managed by construction company Harlequin Hotels and Resorts. It is estimated that over £400m was channelled to Harlequin from UK pension funds with investors, in many cases, persuaded to part with tens of thousands of pounds.”
“Shockingly, many investors lost all their pension funds as a result of investing in these unsuitable products and many are now seeking compensation against the IFAs who should have made customers aware of the very high risks associated with these unregulated investments,” says Mr Evans.
Pensioner hit by life-changing £95,000 loss
One victim, Carol Price, 55, from Hastings was advised to move her £75,000 final salary pension into an investment in Harlequin Hotels and Resorts back in 2011. However, shortly after she made the transfer she discovered the investment was worthless.
She says: “My heart sank when I was told my investment had gone - my dreams for a better future were shattered. I had taken out credit card loans on the strength of the dividend payments I was due to receive, which obviously I was unable to pay back, and I got even further into debt.”
With the help of Hugh James Carol has received £50,000 compensation through the Financial Services Compensation Scheme (the maximum available). She adds: “I want to make others aware of the dangers of transferring money out of a safe investment into a risky one. I would also say to others: if you are considering investing your pension elsewhere, make sure that you completely trust the financial advice you are being given, and insist that all of the risks are explained to you in full, otherwise don’t invest. If it sounds too good to be true, it probably is. I wouldn’t wish for anyone else to go through what I did.”