The way three individual British citizens were, they claim, talked into transferring their pensions into what proved to be unsuitable investments – one of whom was then allegedly offered £6,000 not to go to the authorities or the press with his story – was detailed in a BBC Radio 4 investigation which aired today.
The You & Yours report revealed the names of a number of companies whose advice and investment choices the individuals interviewed said had left them out-of-pocket, and how these individuals were convinced to entrust hundreds of thousands of pounds worth of their savings to companies that, in hindsight, they shouldn’t have, at least not in the way that they did.
Among the companies named in the BBC report, which was also posted as a news story on the BBC’s news website, were Square Mile International Financial and Blackmore Global. All the companies and individuals named in the broadcast have said they did nothing wrong.
One of the individuals whose case was considered by You & Yours was a driving instructor from Milton Keynes named Stephen Sefton, who explained his willingness to trust a Prague-based advisory firm he consulted by the fact that it had shown a UK Financial Conduct Authority number on its website, and that the firm was also listed on the FCA’s register.
This, he said, reassured him that his UK pension, worth around £415,000, would be well looked after, and so he followed the adviser’s recommendation to transfer it into a qualifying recognised overseas pension scheme ahead of investing it, again at his adviser’s recommendation, into two investment funds.
In doing so, Sefton became one of the thousands of Britons who sought to take advantage of the so-called pensions freedom legislation that came into force in 2015, which has given individuals over the age of 55 in the UK unrestricted access to their pension funds, and removed the previous requirement to buy an annuity with the majority of their pension cash pot.
The problem was, Sefton said he later discovered, that the firm in question was “only regulated for insurance mediation”, and “not to give you investment advice, or transfer your pension”, which meant that his investment wasn’t considered to have been handled by a UK-regulated firm, and thus ineligible for the protections investors dealing with regulated entities enjoy.
The You & Yours report noted that the FCA had confirmed to its journalists that the Prague-based firm did not have the necessary permission to deal with pension transfers, but that a principal of the company had told it that his firm was in fact authorised for what it had done, and had done nothing wrong.
Unlike some investors who have been caught out by pension fund operators, Sefton got most of his money back, in part because he realised early on that something was wrong, the You & Yours report noted.
However, he was, and still is, determined to get back what he’s lost thus far, and for this reason, declined to take up an offer he says was made to him by his adviser of £6,000 not to, in the words of a You & Yours journalist, “talk to Action Fraud [the UK’s crime reporting centre], regulators, bloggers or journalists” about his experience.
“I actually believed I had a right to restitution [of the money he was out-of-pocket], with no conditions, no strings attached,” Sefton explained, to You & Yours journalist Jon Douglas.
“No signing anything that says you’re not going to talk to anyone.
“My money should not have gone there [the investments it was placed in] in the first place.
“If they’d added another zero, I might have considered it. But £6,000 was not good enough. So, no I didn’t sign it. I told them in no uncertain terms what they could do with it.”
Douglas noted that the firm denied the money in question had been meant to buy Sefton’s silence, but that it had been meant merely as a “goodwill gesture”.
He also quoted one of Square Mile International Financial’s directors as pointing out that the company’s permissions and activities had been “inspected and verified in full by numerous regulators” and maintained that his firm was authorised and had not done anything wrong.
The article also points out that Action Fraud told Sefton it didn’t identify “any leads” in his case to follow up.
Rory Percival: ‘Fees very very high’
In addition to exploring three individuals’ cases of badly-handled pension transfers, the You & Yours investigation sought the opinion of an investment expert named Rory Percival about whether one of the funds the investors had been told to invest their pension pots in had been appropriate for them. Percival, a former FCA investment advice specialist who is now an independent consultant, said it was not.
For a start, he said the fees, “in comparison with [those in] mainstream investments, are very very high”, he said, with the result that the returns would have to be very very high as well if the investors were to receive any income at all from their investment.
And the fact that the fund locked the investors’ pension money up for 10 years at least – and even then their ability to access it would depend on the fund’s ability to sell its underlying assets at the time the investor wanted his money – made it “absolutely not” suitable for these close-to-reteirement investors, Percival said.
To listen to the broadcast on the BBC’s website, click here.
To read the news story based on the You & Yours report, click here.