‘Zom­bie’ in­vest­ments rack up costs as well as losses for pen­sion­ers

The Daily Telegraph - Your Money - - FRONT PAGE - Laura Miller Laura Miller

Pen­sion­ers who lost their life sav­ings after a prop­erty in­vest­ment failed are be­ing chased for more money to man­age their worth­less “zom­bie” pen­sions.

At least 150 savers with self­in­vested per­sonal pen­sions (Sipps) have re­ceived fee de­mands from Hart­ley Pen­sions, their Sipp provider, for “day to day ad­min­is­tra­tion”, de­spite be­ing locked in a failed over­seas de­vel­op­ment, Har­lequin Prop­erty, which is un­trade­able and was deemed worth­less in 2015 by the in­dus­try com­pen­sa­tion scheme.

Th­ese savers are among hun­dreds of in­vestors in Har­lequin be­ing chased by Hart­ley, de­spite them hav­ing no con­tract with the firm, after it ac­quired their former Sipp provider, Life­time, fol­low­ing its col­lapse in April.

Some of th­ese Har­lequin in­vestors had other in­vest­ments in their Sipp. Life­time still waived cer­tain fees while it dealt with their com­plaints. But an email sent by Hart­ley on July 31, seen by Tele­graph Money, con­firmed that “an­nual Sipp fees will be charged” as well as other fees, with­out spec­i­fy­ing a fig­ure. In­vestors were told to keep at least £1,000 on de­posit at RBS to cover “on­go­ing fees”.

An ac­com­pa­ny­ing doc­u­ment said in­vestors could move their Sipp – and avoid Hart­ley’s fees – but only if their in­vest­ments could be sold or if an­other pen­sion scheme would ac­cept them. This left Har­lequin in­vestors trapped, as no other pen­sion provider is likely to ac­cept a failed in­vest­ment.

Har­lequin Prop­erty took up to £400m from in­vestors to build off-plan vil­las in the Caribbean but pro­duced only a hand­ful. “Guar­an­teed re­turns” of up to 10pc a year never ma­te­ri­alised, and in March 2015 the Fi­nan­cial Ser­vices Com­pen­sa­tion Scheme (FSCS) ef­fec­tively de­clared the cap­i­tal lost when it val­ued the in­vest­ment at nil. Har­lequin’s chair­man, David Ames, is due to stand trial for fraud in Jan­uary. The FSCS has since re­turned some money to in­vestors, but many lost much more than the £50,000 limit.

Sipp in­vestors of­ten rely on in­vest­ment re­turns to pay Sipp fees. With no re­turns and no way to sell the in­vest­ment or move their Sipp to an­other firm, Har­lequin in­vestors are left paying for a zom­bie pen­sion that costs rather than makes money.

Hart­ley’s email told in­vestors with empty cash ac­counts to “make al­ter­na­tive ar­range­ments for the set­tle­ment of our fee”.

Gareth Fatch­ett of law firm FS Legal, which acts for 150 former Life­time cus­tomers, said: “Hart­ley is try­ing to charge Life­time Sipp hold­ers again with­out a con­tract. Har­lequin is val­ued at nil; what is Hart­ley charg­ing £1,000 a year for? Paying makes peo­ple com­plicit in the con­tract be­ing im­posed on them. In­vestors need to be aware that the longer they pay the worse it is for them.”

De­nis McHugh, chief ex­ec­u­tive of Hart­ley, said some Life­time cus­tomers in Har­lequin had other in­vest­ments, so their Sipps had to re­main open and charge­able. “Un­less the FSCS has taken as­sign­ment of the as­set [after paying out to the in­vestor] the Sipp would need to re­main open, as the in­vest­ment re­mains ac­tive and held for the ben­e­fit of the client,” he said. “The in­ter­ests of the ben­e­fi­cia­ries are at the heart of what we do and we are tak­ing ac­tion to pro­tect th­ese in­ter­ests.”

Fears of cuts to higher-rate pen­sion tax relief in the Bud­get have been re­placed by con­cern that two other sweet­en­ers will be cur­tailed, cost­ing pen­sion­ers up to £90,000.

Spec­u­la­tion that the Govern­ment will cut the tax relief that higher earn­ers can claim on pen­sion con­tri­bu­tions has been branded “com­plete non­sense” by peo­ple fa­mil­iar with the mat­ter. They cited Theresa May’s lack of po­lit­i­cal cap­i­tal in the face of heavy op­po­si­tion to the move from tra­di­tional Con­ser­va­tive vot­ers.

In­stead, a fur­ther cut in the an­nual limit on pen­sion con­tri­bu­tions that qual­ify for tax relief and tight­en­ing of the “ta­pered” an­nual al­lowance for those who earn more than £150,000 are con­sid­ered much more likely.

Pen­sion ex­perts at Royal Lon­don, the in­surer, said a £10,000 cut in the an­nual al­lowance to £30,000 was re­al­is­tic. For a higher-rate tax­payer sav­ing into a pen­sion, that would equate to £4,000 in lost tax relief.

Those who planned to max­imise their use of pen­sion con­tri­bu­tions in the last 10 years of their work­ing life would lose £40,000 from their re­tire­ment pot in this way.

A cut in the thresh­old for the ta­pered an­nual al­lowance from £150,000 to £125,000 would mean that some­one who earned just un­der £150,000, for ex­am­ple, would have £25,000 of their in­come sub­ject to the ta­per. This means they would lose £1 in ev­ery £2 of an­nual al­lowance, or £12,500.

For a 40pc tax­payer this would cost £5,000 a year, or a to­tal of £50,000 in the 10 years lead­ing up to re­tire­ment.

To­gether the loss of th­ese two re­tire­ment ben­e­fits could re­sult in high-earn­ing pen­sion savers miss­ing out on £90,000 in tax-free pen­sion con­tri­bu­tions.

Sir Steve Webb, head of pol­icy at Royal Lon­don, con­firmed that “some peo­ple could be hit twice” if th­ese mea­sures were adopted.

Zom­bie state: pen­sion­ers face charges for a Sipp that is of­fi­cially worth­less

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