STM Group has bought a majority stake in self-invested personal pension (Sipp) provider Carey Pensions, which is currently battling legal claims from an investor.
In a market update today (9 October), STM Group announced it would pay £400,000 to buy Carey Administration Holdings Limited – which owns 70 per cent of Carey Pensions and 80 per cent of auto-enrolment provider Carey Corporate Pensions UK.
The remaining minority interests in the subsidiaries are held by Christine Hallett, the chief executive of the businesses, who will continue in her role.
Carey Pensions is currently embroiled in a court case with an investor who argued it had a duty of care towards him when allowing him to set up a Sipp to make unregulated investments, despite the sale being classed as execution-only.
Carey argued it was not responsible for the client’s failed investments as he invested on an execution-only basis and signed a contract saying this was his choice.
But the Financial Conduct Authority, which presented its views in court, maintains a Sipp provider cannot shirk its responsibilities in such a scenario.
STM acknowledged the legal battle and said it has secured indemnities as well as the benefit of significant existing professional indemnity cover from the sellers.
It considered any "residual exposure to this and any other historic industry issues, to be minimal".
STM said Carey’s UK sipp business offered complementary products for the firm, including commercial property Sipps and small self-administered scheme (Sass), and will allow annual savings of £500,000 a year once fully integrated.
Alan Kentish, STM’s chief executive, said Carey Pensions had been a "self-starter in the UK pensions market", and has achieved a lot under Ms Hallett's leadership during a relatively short time frame.
He said: "The management team has ideas and opportunities in abundance and I believe STM's resources, financially and otherwise, will allow many of these to come to fruition.
"The integration of the two similarly sized Sipp businesses will give us some straight-forward integration savings and make the enlarged Sipp group much more efficient. We have seen this previously in both our London & Colonial and Harbour acquisitions. In addition, it helps us to offer niche Sipp products to the UK market with minimal financial outlay."
STM said the transaction would be funded from existing financial resources and was subject to regulatory approval.
The company is already the owner of UK-based Sipp and Ssas provider London & Colonial, which it bought in 2016, and the Carey deal will see STM enter the auto-enrolment market
Carey Corporate Pensions has more than 65,000 members, and it is expected to deliver revenue of approximately £1.5m for the financial year ending 31 December 2018.
STM said this market was "undergoing considerable consolidation" as part of The Pensions Regulator master trusts authorisation process, which started on 1 October.
All existing master trusts have a six-month window to apply for authorisation, and hold reserves to cover potential wind-ups.