STM Group expects to deliver a profit before tax of £3.8m in 2017, an increase of 36 per cent when compared with the previous year.
The financial services company - which sells pensions to those looking to retire abroad and owns self-invested provider London & Colonial - said in a market notice today (24 January) that a key component for these results – in line with market expectations – was the firm’s ability to launch an international Sipp product.
Last March, chancellor Philip Hammond announced in the Budget changes to qualifying recognised overseas pension scheme (Qrops), making all transfers subject to a 25 per cent tax charge, with some exemptions such as if the scheme is based in the same country as the retiring individual.
Since April 2006 individuals leaving the UK to retire elsewhere have been able to transfer their pension savings in a registered pension scheme to a Qrops.
To be a Qrops a pension scheme must be based outside the UK and meet certain requirements.
Before the Budget change, and provided the requirements are met, transfers to Qrops were free of UK tax up to the lifetime allowance.
This new charge affected 80 per cent of all new Qrops business for STM, the firm said. However, the volumes of the new international Sipp volumes are now comparable to the lost new business.
STM’s existing business, particularly its pensions and life services, continues to perform as expected, the company said. This annual recurring stream makes up over 70 per cent of the firm’s revenue.
The provider expects to integrate Harbour Pensions Limited - a Malta based Qrops provider which was acquired in November- into its business in the next six months. This firm currently generates in excess of £800,000 of recurring revenue, STM said.
According to Alan Kentish, STM chief executive, annual recurring revenue continues to underpin the firm’s business.
He said: “However, 2017 has resulted in significant changes to our geographic footprint and business proposition - an upsizing of our UK business and less reliance on our Gibraltar and Malta pension businesses.
"Such a repositioning of our business is time consuming and required some integration during 2017. This investment brings opportunities in 2018 to improve our profit margins.”
The company, which administrative offices in the UK, Malta, Jersey, Spain and Gibraltar, will relocate its head office from Gibraltar to the UK this month.
STM has recently agreed to carry out an independent review of some of its business practices, including its work with financial advisers.
The provider had initially fought off attempts by the Gibraltar Financial Services Commission to investigate the business with a hearing on the matter scheduled for Monday (22 January) before the Gibraltar Supreme Court.
This hearing has now been cancelled, the group said.
Mr Kentish had been arrested in Gibraltar in October over allegations of a failure to disclose information over a tax dispute involving a client.
But he was later released without charge and an application for judicial review against the Royal Gibraltar Police was filed to the Supreme Court.
At the time of Mr Kentish's arrest, STM said one of its clients had been involved in a dispute between two countries, between 2008 to 2013, over their respective rights to the taxes paid by him.
Until it was clear that the issue was a tax dispute, Mr Kentish followed compliance procedures in filing two relevant suspicious activity reports, which were externalised to the Gibraltar Financial Intelligence Unit, the company stated at the time.
maria.espadinha@ft.com
