PensionsOct 31 2014

FCA warns on multi-million pound Sipp transfer scheme

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“Serious concerns” have been raised by the Financial Conduct Authority over a pension transer scheme which has seen up to 100 savers switch as much as £4m into self-invested plans with underlying investments in an Aim-listed company in return for cash back incentives.

In a warning posted on its website, the regulator states between 60 and 100 investors have put their workplace pensions at risk by buying shares in Emmit Plc, an ‘investment trading company’, shares via self invested personal pensions. As much as £3m to £4m could be at risk.

The FCA adds the individuals running the scheme appear to be targeting inexperienced investors who might not understand the full implications of what they are doing.

According to the regulator, investors are being encouraged to transfer pension benefits into a Sipp to purchase Emmit shares at a particular price from a particular market counterparty. Some investors are being offered “cash back” on their investments, paid by a third party.

Incentives include statements that they are getting a “good price” for Emmit shares, because they normally sell at a much higher price, and the offer of an immediate cash payment of up to 30 per cent of the transfer value of their pension.

The FCA also warned that some investors appear to have invested all their pension assets into the company and may suffer “significant financial loss”. The withdrawal of assets from a pension scheme could incur a significant tax liability on the investor.

“Our review of trading in the shares of Emmit has shown that pension investors have constituted a significant proportion of the demand for the shares of Emmit, which may impact on the normal balance between supply and demand for these shares,” the FCA’s statement continues.

The investing company’s shares were trading at 6p a share in December 2013, had risen to over 200p earlier in the year, and were at 97p when suspended by the London Stock Exchange last week.

Emmit’s market capitalisation is £17.8m and according to its last unaudited interim accounts, the liabilities exceeded assets as at 30 June 2014.

In September the FCA warned Sipp operators to be “vigilant” and do proper due diligence to assess higher risk and unusual investments. The regulator states that in the Emmit case, it was grateful for proactive reports from a number of authorised firms.

The FCA says is not currently aware of any information that Emmit itself is complicit in the conduct set out above.

peter.walker@ft.com