Too good to be true investment returns – Another SIPP provider collapses

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

This article reflects the opinions of its author and not necessarily those of ShareSoc.

Need for name on register further evidenced as high costs of administration seem likely

I have been to Cape Verde and seen some of The Resort Group “investments”, many of which are half built following a boom. So, I was not that surprised when I read this story.

The Financial Services Compensation Scheme has declared SIPP operator Rowanmoor Personal Pensions in default after receiving 1,464 claims against the firm. Rowanmoor collapsed in August 2022 under the weight of hundreds of complaints related to failed offshore investments in its SIPPs. These were then re-routed from the Financial Ombudsman Service to the FSCS, which has been investigating them since.

The company, which operates nearly 5,000 client pensions, manages assets of £1.4billion. Rowanmoor’s failure comes after it was revealed in 2021 that the company had received over 800 complaints against it through the Financial Ombudsman Service (FOS). Over 500 of these complaints were regarding investments made into the Cape Verde based property group, The Resort Group. As of 1st September 2022, the number of complaints had risen to over 1,000.

According to the FCA, one complaint upheld by the FOS was representative of most complaints against Rowanmoor. The regulator also said Rowanmoor had entered administration due to having “historical high-risk, non-standard assets” and that it failed to conduct adequate due diligence before accepting such assets into clients’ SIPPs.

Rowanmoor’s collapse into administration will see many clients lose significant sums of cash. While the FOS can award compensation of up to £375,000, all outstanding and future complaints will now be brought via the Financial Services Compensation Scheme (FSCS), which has a significantly lower compensation cap of £85,000.

Whilst it appears that the FSCS will award compensation for any losses caused by mis-selling on the part of Rowanmoor, it is not clear that the FSCS will cover any excess costs of the administrators and the transfer of SIPP accounts. This has parallels with the present Hartley Pensions case where the FSCS are refusing to pay the costs of the administration and transfer of pensions, leading to the likelihood of a £37m “haircut” for the SIPPs.

More background here:

 

Cliff Weight, ShareSoc member

DISCLOSURE: The author does not hold shares/a short position in RowanMoor or The Resort Group.

3 Comments
  1. Amin Mohammed says:

    I am regularly dismayed, but not surprised, by the stupid investment decisions some people make.

    It is one thing to dabble a small part of your total wealth in a high risk investment. It is another thing entirely to put most of it into one investment, (not even a low risk one) let alone a high risk one.

  2. Philip says:

    Can’t agree more. Every advise says diversify

  3. Hazel says:

    I genuinely don’t know why you are surprised by the ‘stupid investment decisions people make’. Many of us who’d worked in the public sector were given really poor advice from so called financial advisors. We then put our money into at least 3 investments thinking that we were diversifying and minimising the risk. When all investments went belly-up we knew that we had been conned. But it was too late. The UK is full of con-artists and its becoming more difficult to work out who is who. I am approaching my 61st birthday and I have no pension at all despite working and paying in to a pension since I was 21. I believe that I am not alone. If it was not for the compensation scheme that the Government run, I would not even have received a penny in compensation. It’s a shame that ordinary people have to contribute to the compensation scheme which means the criminals get away free. It does seem that we will all need to specialise in investments, pensions, banking, accounting and the law. And then let’s see who’s going to run our hospitals, teach our children and run social services and the other public services. GB is broken!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.