The Financial Services Authority (FSA) will from time to time notice an investment trend that concerns them.
Recently they have issued what they refer to as an ‘alert’ in respect of an overseas property investment that appears to have become popular with SIPP investors.
The money in these SIPPs often comes from transfers from a previous occupational or personal pension arrangement.
Whilst there are some circumstances where a transfer to a SIPP (or indeed any other type of pension arrangement) makes real financial planning sense, there are also circumstances where the value of doing so is questionable.
We have commented before on unregulated collective or individual investments and pose the question “With all the fully regulated choice, why invest SIPP money in unregulated investments?”
But we need to be clear about what we are saying; after all I sit writing this note in Sundial House, a commercial property owned by my SIPP, which is of course not a regulated investment.
So the distinction we want to make is between such direct unregulated investments which might perhaps be described as ‘mainstream’ (direct investment in UK commercial property for example) and the more esoteric investments, overseas holiday property developments for example.
I am sure the are some fine examples of the latter but we are also concerned about those that might be less well managed and I am sure that there are some that are probably simply scams.
The FSA imposes a regulatory responsibility on IFAs to make sure that they do proper due diligence before advising a SIPP investor to invest overseas property schemes.
Such due diligence is designed to protect the UK consumer of pensions advice and should be carried out to your satisfaction before your adviser recommends such an investment.
I have a horrible feeling that some of these investments are going to come back to haunt the Financial Services Compensation Scheme (FSCS) and probably those IFAs who don’t advise on such investments who effectively fund compensation under the FSCS.
Photo credit: Flickr/Jonas Tana
