One of the leading SIPP providers in the UK has called for action to be taken to prevent investors losing money in risky or even fraudulent investment schemes.
In comments made to FT Adviser , an industry publication, AJ Bell, which runs the popular Sippcentre and Sippdeal SIPPs has suggested that the FSA (Financial Services Authority) and HMRC should consider moving back to a system of listing permitted investments for SIPPs (Self Invested Personal Pensions).
Permitted list of SIPP investments
Prior to April 2006 a permitted list of investments which SIPP providers could consider was in place. However, since then SIPP providers have been allowed more flexibility in the investments they can consider within their SIPP, although they do of course still have to work within HMRC guidelines.
The comments come in the wake of two recent financial scandals which have seen investors lose considerable sums of money.
Firstly a bio fuel investment involving Jatropha tree plantations in South East Asia recently became insolvent, with around 2,000 investors losing approximately £40 million; this is under investigation by the Serious Fraud Office. Secondly the directors of Arck LLP, which invested in property in Cape Verde, were arrested and questioned by police. One firm of industry lawyers believe that this company alone could account for up to £60 million in losses.
These are just two investments in a long line which have seen investors rack up significant losses with risky unregulated investments being offered to mainstream investors.
AJ Bell, who did not place either of these two investments in their SIPPs, believe that going back to the pre April 2006 may be a way of reducing the risk of an investor losing money in such a scheme.
Billy Mackay, Marketing Director at A J Bell, spoke to FT Adviser saying: ““We have a dedicated team and anything that is requested will be looked at to check what the risks are. If there is any reason to be concerned, we will say no.”
Mackay continued: “Sipps providers might want to refer back to that list. It’s a simply way of seeing what structures the government would allow at the time. It worked pre-A-day and would still work now.”
“I don’t think it is unusual to consider these aspects and to go back to pre A-Day is an easier solution. No one was crying out for the permitted list to be removed and if you asked any providers they would all agree that they did not have any problems with it.”
Concluding Mackay said: “It [would] give providers, advisers and clients certainty about what should be held on Sipp [and] all issues of uncertainty could be avoided.”
Too good to be true
The past couple of years have seen more and more unregulated alternative investments being offered to investors, often by equally unregulated sales people.
Often, although not always, investing in land overseas the schemes are usually marketed with high projected returns. The marketing literature usually tempts investors by the promise of high returns, which may be ‘guaranteed’.
Financial experts warn that if the promises made by an investment are too good to be true then they generally are and that all unregulated investments should be treated with extreme caution.