Your IndustryApr 17 2013

Warning on using overseas property for pension funds

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Advisers should be wary of schemes which involve clients putting their pension pots into esoteric overseas property investments, Philip Bray has warned.

Mr Bray, marketing manager for Nottinghamshire-based Investment Sense, said recent regulatory issues with overseas property developments showed that investors and advisers should be wary about committing their hard-earned pensions into the schemes.

He said: “My feeling is that the risks related to investing in overseas property developments are probably fairly similar, wherever the investment is based.

“We have received promotional emails about overseas property developments recently, but have had few enquiries from clients, which may be because we have made a name for ourselves in saying no to such schemes.

“The issues the Financial Conduct Authority has raised over esoteric property developments show that investors must be careful.”

His warning came as one adviser, who did not want to be named, said his client had corresponded with an unregulated introducer, Derby-based First Review Pension Services, about the possibility of using her occupational pension scheme to invest in the Llana Beach Hotel in Cape Verde. There is no suggestion the hotel’s management does not follow the rules.

The director of First Review Pension Services, set up in June 2012, is Andrew McLennaghan, a former financial adviser for Optimum Financial Group, which is now in liquidation. Mr McLennaghan said the firm closed in 2010 as a result of the collapse in the mortgage market.

He said First Review Pension Services does not contact clients directly but gets data from introducers and that the firm works with IFAs to help clients make sure they have a suitable retirement income.

He said: “There are a lot of disenfranchised investors, as IFAs are dealing with fewer clients. The vast majority of our clients would either keep their pension or switch to a more appropriate one. A Sipp scheme investing into overseas property developments may be suitable for some people and one of the schemes we recommend is Cape Verde investments.

“We would clearly point out to the client that this would be perceived as a high-risk investment. We are very aware of liquidity and would recommend this as part of a balanced portfolio.

“We would only allow clients to use 20 per cent of their retirement income for this.”

A statement from the Resort Group said the Llana Beach Hotel & Spa is 90 per cent sold. Construction began in September 2012.