From biofuel to forests in Brazil: The toxic investments that rip off pension savers

Examples of money being squandered via Sipps include investments in biofuel plantations

How a cold-call can lead to disaster

Anyone thinking of opening a Sipp to invest in the unusual should be extremely wary.

Martin Tilley says: ‘If an investment is unregulated, treat any marketing material as if it is a pack of lies – at least until you can verify otherwise through independent and thorough research.’

Scammers are becoming sophisticated. Tilley says the investments they peddle look ‘at first, second and third glance to have substance,’ adding: ‘Only when you delve deeper and start asking questions do you find you are not getting the answers you want.’

A typical journey for a riches-to-rags victim starts with a cold-call from an ‘introducer’ who is paid handsomely for recommending a toxic investment.

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Michelle Cracknell, chief executive of The Pensions Advisory Service, says: ‘Sipp scams often involve an introducer promoting an investment that is at best high risk, at worst fraudulent.

‘A common hook is an exciting ‘high-return’ investment. Often now the hook may also be to access the high transfer value from a defined benefit or final salary workplace pension. Introducers are usually unregulated and getting recompense from them is difficult.’

Investors in regulated investment funds can get compensation if their investment goes bust through the Financial Services Compensation Scheme. The limit is £50,000 per person, per firm – rising to £85,000 from next April.

Cracknell says anyone investing via a Sipp should ask about the compensation they would receive if the investments went bust – and obtain all details about the costs involved, including if they transferred their money out. She adds: ‘Do not follow up on calls from introducers that have approached you.’

For free and impartial advice on pensions visit pensionsadvisoryservice.org.uk or call 0800 011 3797. Over-50s looking to make sense of pension choices can make a free appointment with Pension Wise. Visit pensionwise.gov.uk or call 0800 138 3944. To find a regulated financial adviser use websites such as unbiased or VouchedFor. To read more about pension scams, visit fca.org.uk/scamsmart.

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