STM Group, the Gibraltar-based, AIM-listed provider of QROPS and other pension products and corporate services, said it has witnessed “a significant uplift in business” for its UK operation since the launch of its “International SIPP” two months ago.
The company said it was “still too early to predict the long-term contribution to group profitability” of the new product, but in a trading update ahead of its annual general meeting in the Isle of Man today, it noted that the speed with which it was able to “launch this alternative product and promote it as a replacement to the affected QROPS products further validat[ed]” its decision to acquire the UK SIPP provider London & Colonial last year.
This promising launch, coupled with the imminent launch of a overseas pension offering for UK expatriates living in Australia, “a strong first quarter” from its life insurance operations and other measures taken in response to the changes in the QROPS market made STM’s management confident that the company would meet its revised 2017 market expectations, the statement added.
“It is too early to say with any degree of certainty the extent to which the International SIPP offering will replace the [lost QROPS business]….however, the group has seen a reasonable uptake of International SIPP applications already and growing interest, hence expects a proportion of the foregone QROPS revenue will be clawed back, albeit at slightly lower margins”, STM said in its update, which may be viewed on its website by clicking here.
STM Group is one of the most prominent providers of offshore pension schemes to the UK market, particularly so-called qualifying recognised overseas pensions schemes, and thus, as reported, was among those hardest hit by the surprise news in March that a new 25% tax would be levied on most UK pension transfers outside the UK, beginning on 9 March. A few days after the new tax was introduced, STM said it said it could cost the company a maximum of around £1.1m (US$1.3m, €1.25m) in 2017, under a “worst case scenario”, and could hit as much as 80% of its pension transfer business.
In today’s update, STM said that its prediction of an 80% hit to its new QROPS applications had proved accurate, and that as a result, its businesses in Gibraltar and Malta had therefore downsized their new business teams, “thereby negating some of the impact on expected profitability for those operations”.
Meanwhile, owing to “the ‘annuity’ nature of the revenue streams of the existing books of business” this “remains wholly unaffected by the changes”, the STM update noted.
And while STM’s management was “hopeful of increasing revenues from new business applications for its International SIPP”, it sees as well the potential to be able to “further reduce costs in the business development area, should the International SIPP not gain traction in certain geographical areas”, as well as the potential to “explore possible consolidation opportunities in the QROP market”.
In a statement after today’s meeting, STM said all of the resolutions on the agenda had been approved.
STM has operations in the UK, Malta, Gibraltar, Jersey, and Spain. It originally began as a corporate and trustee services provider, but expanded into the pension transfer business after “A Day” in 2006, when the UK’s pension regime was overhauled. It listed on the Alternative Investment Market of the London Stock Exchange in 2007.