If you decide to invest your pension funds through a SIPP (a self-invested personal pension) then you have a lot more control over where your money goes. That might be a good thing – you are free to invest where you see fit, and you aren’t tied into your provider’s own investment portfolios.
Many UK customers have invested in The Resort Group and found that they are now struggling to get back the money they put in. Those customers may be able to claim for mis-sold pensions.
But it also has its drawbacks – you could invest in something which can cause you to lose all your money.
A lot of UK customers have had such issues when investing in property in Cape Verde – read on to learn more, or to get advice if you are one such pension customer.
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One of the most prominent cases of mis-sold pension investments for UK customers in the last few years is that of The Resort Group. This offered customers the chance to invest in a holiday property in Cape Verde – primarily the Llana Beach Hotel and the Dunas Beach Resort. The promised potential returns were outstanding – up to 10% a year. But this should’ve simply served as a red flag.
When launched as The Resort Group in Gibraltar, the company began offering investments into these two properties through various independent financial advisors (IFAs) and other pension providers in the UK. However, there were a number of factors which meant that these were unsuitable products, that most people should have avoided.
The first problem and arguably the biggest is that it wasn’t made clear what people were actually investing in. While some of the investments made in The Resort Group were classed as ‘direct’ (i.e. the investor directly owned a room/hotel/piece of land), most of them are ‘fractional’ holdings.
This means that the investor would invest indirectly in a dormant country. They would technically own fractions of rooms/land.
Most customers, when they invested, didn’t realise that in order to see a return on their money, they would have to personally take responsibility for the sale of the property – the second issue.
So now, customers own only fractions of rooms or land that are much more difficult to sell (because very few buyers want to own a fraction of a hotel room), and even if they could find a buyer, they weren’t aware they had to arrange the sale with all the lawyers, property agents and other associated property selling costs themselves.
Even beyond this, there was the simple fact that investing in an unregulated scheme overseas carries massive risks. Risks that, realistically, should only be taken by people who are serious about investing and can live with losing all their money if things turned sour.
It was way too high a risk for standard SIPP customers who were often risking their entire life savings. By putting all of that amount into one specialised industry, in one country, and indeed in one of two hotels, there was a significant chance that the business could fail and all money would be gone.
Some of the investments are seeing rental returns – but in many cases, these are being absorbed as fees by the pension provider. So even if your property exists and is generating income, it might not be money that you even see as a full return. You may need to sell to get your money back and, as covered, that isn’t straight forward.
Indeed some people have lost huge sums already – as reported in the UK media. Compensation is an option, with successful claims made through the Financial Services Compensation Scheme. Of course, The Resort Group and various pension advisors who sold the scheme to customers are claiming that it is legitimate and that they have done nothing wrong.
They insist that all advice given included evaluating customers’ attitude to risk, implying that if customers were given the advice to invest with The Resort Group that they were made aware of the circumstances and risks involved, the fact that many are claiming is false.
Many people with a pension investment in The Resort Group are now trying to actively sell and get out. Where they can’t, they are turning to compensation and claims as a means of reclaiming their funds.
So firstly, if you’re presented with an opportunity to invest your money in Cape Verde property or indeed any overseas property investments, pause. Consider if it all sounds too good to be true – it likely is.
You absolutely must get comprehensive financial advice before you commit to any investment. Otherwise, you could be throwing your money away. Think about how long it has taken you to build up that fund, and what would happen if you lost it all at once.
That being said, travel property is generally a reliable investment if done right. Travel is an industry that will never die, and opting to invest in a good opportunity in the proper country could be beneficial to you. However, there are certain things to watch for.
You must make sure your investment is direct, and that you have full ownership of an asset (whether that’s a hotel room, an apartment, some land or anything similar) that you could easily sell if needed. You also must make sure that you are investing with a reliable company, where you can monitor the construction and maintenance works.
And finally, you should always ensure you don’t invest your entire fund into overseas property. Make sure it is split between different companies in different industries so that if something catastrophic does happen to one fund, you aren’t left penniless.
Even with all of these considerations, investing in any overseas property will be a risk and should be treated as such. Don’t listen to any salesman who guarantees you a good return. Get independent advice, and weigh up your options. Cape Verde is a popular tourist destination, but that doesn’t mean you’re definitely going to make money by investing in the area.
If you’ve invested in The Resort Group and are now struggling to reclaim your funds, you needn’t panic as there are options open to you. Your first plan should be to speak to your pension advisor and ask them to help you in either reclaiming the funds or in selling your investment so that you get your money back.
If they refuse, then you may have a case for claiming compensation based on the product being mis-sold. You might be entitled to claim through the Financial Services Compensation Service if you can show that you weren’t given appropriate advice when you made your investment.
If the risks, issues with fractional holdings or problems with selling abroad weren’t made clear to you, then you will have a case.
Unfortunately, it is very easy to get caught up in the moment when offered an investment opportunity that quite literally looks too good to be true. The problem is that when taking advice from your pension adviser, you are wholly dependent on their knowledge of the product and the wider consequences.
For example, the Cape Verde investment debacle has cost a lot of people a significant amount of money, much of it from pension funds. The returns, yes, they did look too good to be true, but many investors were persuaded to invest by their advisers.
While the whole concept of claiming compensation hinges on the claimant’s ability to prove negligence on behalf of a third party, there is a general misconception about advice. If you are given advice by your pension adviser, which you agree to, this does not make you responsible for the advice. If the advice was inappropriate for your situation then, even though you agreed to it, you may still have grounds for compensation.
Even though there is a defined regulatory compensation process, the system will not necessarily look at the wider picture. This is why more and more people are looking towards claims management companies to pursue compensation as a consequence of negligence.
The Cape Verde situation is a perfect example where many pension fund investors were advised to invest in the Cape Verde project. Consequently, it is unclear as to whether some investors own a direct element of the project or a fraction of the project. Indeed it now appears that some investors have always been obliged to find their own buyers if looking to cash in their investment. Everything is so mixed up!
In theory, claimants may have a case against not only the Cape Verde owners but also their own pension fund advisers. The likelihood is that because pension fund advisers are regulated in the UK, it may be easier to pursue compensation as a consequence of negligent advice.
Many people forget pension advisers have a legal obligation/duty of care towards all of their clients. If for some reason, they fall short of this duty of care, there is every chance that they may be found negligent and sued for compensation.
If using a claims management company the likelihood is, assuming you have a strong case, you will be offered a “no win no fee” arrangement. This effectively indemnifies you against any costs incurred by the claims management company when pursuing your case.
In exchange, they will negotiate a success fee which would see them receive a percentage of any compensation awarded. The “no win no fee” arrangement is integral to holding negligent third parties to account and prompting a change in advice, processes and even industry constituents.
Without the “no win no fee” structure, there would undoubtedly be less regulatory pressure today and less change compared to years gone by.
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for a mis-sold pension and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.
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