FEBRUARY 2011 |
www.opp.org.uk WORDS | Geoff Hadwick
INVESTMENTS RETIREMENT SIPPs | 49 SIPPs: time bomb alert
At times, it felt like every other international property scheme in the market last year was claiming to be “SIPP-compliant” … and therefore a good long-term bet. But, for anyone with a client trying to fi nd a sensible and reliable place to invest his personal pension fund, the true nature of these schemes is proving to be a much more complicated story. Is the overseas property industry doing a good job, or is it simply building itself a ticking time bomb? What is really going on in the world of Self Invested Personal Pensions?
T
he “fi rst thing to remember, always, when you are trying to help someone invest in an
overseas property SIPP,” says OPP legal expert John Howell, “is that it is their pension you are talking about.” “It is poverty in old age if you
get it wrong. And there is an awful lot of mis-selling going on out there … with misleading ads and missing paperwork.” “I personally think that far too
many developers are far too cavalier about the whole thing.” Guy Tolhurst, managing director of The Intelligent Partnership, agrees. His company, which is a specialist consultancy advising on product structuring and SIPP compliance, is deeply involved in the sector. He trains mortgage brokers, agents
and IFAs on selling unregulated investments … whether they are part of a SIPP, an investment plan or a savings scheme … and he is worried. “In 2010 we saw a lot of
developers who thought that getting their scheme SIPP-
approved would be the answer to their problems.” “Too many rushed in,” says
Tolhust, “and all sorts of things went on.”
“Holiday homes are being shoe- horned into SIPP products, two- year rental guarantees are being offered all over the place – Egypt, Spain, France, Brazil – and buyers need to think much more long-term than that.” “What happens at the end of
the 2-year guarantee? In many cases, nothing.” “SIPP-compliant is now the sixth
bullet point on every ad, when often the property should not be SIPPable at all. We are storing up a terrible long-term problem.”
The trouble is, “putting SIPP- compliant on your ads means nothing at all in truth,” says Howell. “You shouldn’t, but you can, put pretty much any kind of property into a SIPP if you want to. Often the paperwork
is not in place and no one is policing the market.” “The FSA (Financial Services Authority) is the regulatory body, but you don’t need their OK before
“SIPP-compliant is now the sixth bullet point on every ad, when often the property should not be SIPPable at all”
selling a SIPP and no-one routinely polices the market.” For Stuart Law, the chief executive
at Assetz plc, SIPPs just aren’t “the big white hope” any more. And, he adds, he too thinks
that over the next few years, a lot of schemes are ultimately going to “judged as dodgy non- compliant product.” But it is not all bad news. Both Howell and Tolhurst have seen signs of self-discipline in the market. More and more SIPP trustees are taking the approval process seriously says Howell. “Yes, and SIPP providers like Hornbuckle Mitchell,
Rowanmoor Pensions and Pointon York are now turning a lot of schemes away,” says Tolhurst. “They look carefully and they ask is it a good investment.” “If we don’t encourage more firms to act like this, the SIPP market will end up like a car with no engine. It won’t be going anywhere.” Tolhurst thinks agents and developers need to be much more robust with rental guarantees and they need to make sure their clients have a good exit option. “Buyers need to be told if the
country they are buying into recognises a SIPP as a tax-efficient wrapper, and whether or not they will be hit with Capital Gains Tax if they want to sell up at any time,” Tolhurst warns.
Pick the right place and the right developer. Resort Group managing director Charlie King knows this too and he ensures that all buyers come to his developments in Cape Verde via a proper independent financial advisor. “This is absolutely essential,” he
says. “We take a very purist view of the SIPP market and we only use a narrow panel of SIPP providers. Every investor must go through a best advice process.” “We avoid SIPP providers who are more liberal in their interpretation of the HMRC rules. I am very suspicious of creative SIPP approaches.”
And it is a policy that is working The clock is ticking | and time is running out for all those SIPP schemes that will ultimately prove to be a bad investment
for King. “70% of our entire volume was through SIPPs last year,” he says, “rather than cash sales.” In fact, the Resort Group is putting the finishing touches to plans for a
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