Has somebody talked (or tried to talk) you into investing your nest-egg in a slice of sun-soaked paradise? Foreign holidays to warm and beautiful destinations have been an increasingly popular way for people to spend their money for years.
But does this mean overseas property investments in hotels and other projects are a good idea for your pension?
The answer depends on your circumstances, and how much risk you can undertake.
Cold-Calls and Free Pension Reviews
Over the last 10 years, tens of thousands of people in the UK were cold-called and offered a “free pension review”, and many were told they would be better off transferring their pensions into a SIPP in order to invest overseas.
They were usually promised high returns, sometimes as high as 15% per year, and therefore a better retirement at the end of it all.
But many people transferred without being properly informed that overseas property investments are considered high-risk, and they could lose some, or even all of their pension by doing so.
Many have been mis-sold their overseas property pensions.
How Are Overseas Property SIPPs Being Mis-Sold?
Here in the UK, the Financial Conduct Authority (FCA) is the financial services watchdog – and acts as a regulator that tries to ensure everyone is following the rules, being safe and fair, and not getting up to anything naughty with other people’s money.
But they only reach so far, and as soon as money ends up being invested abroad, the FCA has little to no power over what happens to it, meaning those investments could be more at risk from fraud, collapse and a whole host of other problems.
If that happens (which it often does), investors could lose all of the money they invested. In some cases, this could be their entire pension fund.
If the risk of investing overseas is not presented well to the investor, and their suitability for it not checked, then it could be mis-sold, and they may have a claim.
A Case Study
Perhaps the most famous case in recent times is the Harlequin Properties saga.
Harlequin was set to build around 6000 hotels, villas and rental properties across the Caribbean, and took about £400 million from UK investors. Many did so after being told to invest via a SIPP pension.
But Harlequin was more than a little troubled, with part of the company entering insolvency proceedings in October 2016, and the director was charged with fraud by abuse of position in 2017.
By March 2017, the financial services compensation scheme had paid out £98million in compensation over Harlequin, mainly for bad advice from financial advisers to place their money with Harlequin.
What Does Bad Advice Look Like?
High-risk overseas property investments can still be a suitable recommendation for a pension, but usually only for people who earn over £100,000 per year (making them high-net worth individuals), and those who are Sophisticated Investors (lots of experience handling this kind of risky venture).
If you aren’t either of those, but made an investment in overseas property, then there is a big chance you may have been mis-sold and had your money put at risk.
Financial Advisers and Negligence
Most of us aren’t financial experts, that’s why we often pay and trust a financial adviser to tell us what to do regarding our pensions.
But with overseas property investments, the commission and fees that can be paid to marketing companies and IFAs can be huge, sometimes as high as 15% of what gets invested.
Most claims for mis-sold overseas property investments in pensions go against the financial adviser because it is they that have the obligation to advice in your best interests.
If they didn’t you may be able to claim for an overseas property investment.
Don’t lose your pension to bad advice, and if you have been mis-sold, don’t take it lying down.
Tom Iveson writes about mis-sold pensions and SIPP for claims specialists at Get Claims Advice