Having a SIPP allows you to decide where your pension funds are invested. But these scammers will ensure you endure a penniless retirement.
I have a personal pension. In fact, I have two, although I doubt either will buy me more than a cup of coffee a week once turned into annuities.
But because I have two on the go – and both are with worthy but boring mainstream investment groups – financial advisers often suggest that I convert them into a self-invested personal pension (SIPP).
The selling points of SIPPS
SIPPs are Government and HMRC approved (obviously because all pension products have to be regulated for tax relief), but all that approval and tax back means nothing if a SIPP holder invests in rubbish. And a recent court case shows how easy it is for well-meaning investors to get suckered into "green" schemes where the real green is the colour of the dollars winging their way out of the pension buyer's savings and into offshore tax havens.
Besides putting your retirement savings in one place, another selling point of SIPPS is that investors can choose their own assets rather than be limited to the standard range. Barring some totally way out exotic investments – no credit default swaps for example – it can be an investment free for all.
Now maybe some of those who bombard my email in-box think I already have a SIPP (which I don't). For they are forever trying to sell me "SIPP investments" or "SIPP-compliant opportunities". Sometimes, they even phone me.
Hold on. Lovemoney.com readers who are up to speed with financial services rules and regulations will know that firms are not allowed to sell in this way. They can't just say "buy this" or "get a load of that". The FSA bans this form of advice – it's fine if SIPP holders make up their own minds; but it's against the rules to cold call (or send out unsolicited letters or emails with investment advice).
However (there's always a "but") none of the FSA's immensely long and complex consumer protection rule book applies if the firm flogging the assets is not regulated by the watchdog because it does not have to be.
It's investment Catch 22.
There's always a catch
Readers of Joseph Heller's original Catch 22 will recall this exchange: "You mean there's a catch ? " "Sure there's a catch" Doc Daneeka replied. " Catch-22. Anyone who wants to get out of combat duty isn't really crazy."
Pilots who wanted out of fighting had to prove they were psychologically unfit. But only the thoroughly sane would do this. So no one could ever beat the system.
The investment version is that anyone who has to be regulated does not need regulation while anyone who is not regulated needs regulation but won't get it. And this applies even if the investment is "SIPP compliant".
There are two scams that feature a lot in this blog. One involves land or property (such as landbanking or so-called hotel schemes) and the other plays on our desire for green credentials (carbon credit trading schemes and land purchases to "protect" the rainforest).
Late last month, Southwark Crown Court was requested by the Serious Fraud Office to freeze the assets of three companies selling "sustainable", "SIPP-compliant" investments. The three firms were Sustainable Agroenergy (formerly Carbon Credited Farming), Sustainable Wealth Investments(UK) and Sustainable Growth Group. The last of this trio was only set up in early January this year – the other two had a two- to three-year shelf life.
All these firms are now bust and in adminstration, so whether there are any assets to freeze may be a difficult call. Most of their directors live in Thailand or Indonesia although one, a director of 21 companies since 1997 all of which have been dissolved, popped back to stand as a local councillor in Devon in 2007 for the United Kingdom Indepedence Party. He lost.
The investors, who lost about an average £20,000 each, were told they were buying into plantations of bio-fuel producing jatropha trees in Indonesia and Thailand. They were promised big tax-free dividends and major tax-free capital gains when they sold the forest.
Some 1,500 SIPP owners put £32m into the scheme. Their losses are not covered by any compensation scheme – and they may never see their cash again.
But there are big rewards out there for selling these phoney investments to green (in more than one sense) pension buyers. In general, commission rates range from 20-25% so some high pressure sales outfits will have pocketed up to £8 mllion for these Asian trees.
So here's a new slogan. Where there's a SIPP, there's a SAP. Don't let yourself get taken in by these scammers.
The top 10 scams of 2011
Watch out for this pension scam
Land banking involves plots of land offered for sale, often online, with the promise of sizable returns when planning permission is approved for housing or other development. Yet often the land is located in areas protected from development by planning law.
The companies involved soon disappear with investors' money and as the firms are not protected by the Financial Services Authority, their funds are not covered by the Financial Services Compensation Scheme
It is reasonable to assume that if you take out a mobile phone contract at £30 a month for 24 months that's exactly what you'll pay unless you exceed the tariff. Yet mobile phone providers have come under fire for a snag buried in the small print – a clause to allow mid-contract price rises.
Prices are rising by a median of 81p a month and 70% of consumers are completely unaware off this sneaky move, according to Tesco Mobile, so be sure to check any new contracts before you sign the dotted line.
Fraudsters recruit unknowing accomplices through email under the guise of offering employment, seeking a personal favour, or through internet shopping sites. The recruits are persuaded into receiving what are essentially fraudulent payments and then passing funds on.
The 'mules' are frequently offered a small financial incentive to encourage involvement and face difficulties in proving their innocence when the fraud is discovered.
The scams claim to offer people the chance to profit from carbon credits. Under regulations that permit businesses to emit a tonne of CO2 – the companies claim to offer investment in green projects like a forestry scheme or a solar panel project, which generates carbon credits that are then sold on to heavy industry.
A flashy brochure or website tells of a reliable 'government-backed' scheme which provides reliable returns for investors. Such a scheme doesn't exist however – a reality investors only discovered when they have parted with their cash and the company is untraceable. As with land banking, fraudulent companies are not covered by the FSA so victims have no course for recompense
Receiving an email from the taxman saying you are owed a payment may seem like a nice surprise, but it is actually from fraudsters trying to relieve you of your cash instead.
The emails provide a "click-through link" to a cloned replica of the HMRC website. The recipient is then asked to provide their credit or debit card details - all the information the criminals need to clear your account, and sell on your personal details.
Insurer Direct Line reported a hike in the number of 'crash for cash' scams last year – where fraudsters fake accidents by making unnecessary emergency stops at busy roundabouts or slip roads, forcing motorists to crash into them.
They then make bogus claims to the innocent motorist's insurer, often including fictitious injuries and passengers.
Learner drivers have been taken for ride by being unknowingly taught by trainee instructors. An investigation by the AA found up to 27,000 extra driving tests have been failed in the last year because one in 10 learner drivers are unwittingly taught by an instructor they do not know is learning on the job.
July saw the arrest of a Leicester postman who stole £46,686 worth of mail over two-and-a-half years. Yogeshbhai Patel, 38, was jailed for two years for stealing mail including 2,000 DVDs and 2,250 games along with CDs and other electrical equipment. He intercepting the valuable packages and spent the money on living a luxury lifestyle including helicopter rides and a trip to Las Vegas.
The Trading Standards Institute reported over 200 cases where elderly homeowners have been targeted by telephone cold callers, purporting to be from their energy supplier and offering energy saving devices which could cut their bills by 40%.
The TSI tested the devices in homes where owners had fallen for the scam, only to find they both failed to satisfy electrical safety standards or deliver any tangible energy savings.
Thermal cameras that track ATM pin numbers are the latest weapon in their arsenal and US scientists have warned it is the next threat for this form of crime. Researchers at the University of California at San Diego found that up to 45 seconds after a person types their pin code into an ATM machine or door entry pad the numbers and even the sequence are still readable by thermal cameras.