Financial watchdogs have taken control of a suspected pension liberation scheme that put close to £6 million of retirement savings at risk from diverting the cash to dodgy investments.
The Pensions Regulator (TPR) also uncovered a network of unregulated advisers earning huge commissions for introducing prospective clients to the London Quantum Occupational Pension Scheme.
These advisers were paid commission of 30% of the transfer fund value and allegedly sourced retirement savers with promises of unrealistic investment returns from random cold-calling.
The TPR has appointed independent trustees to run London Quantum and started efforts to recover the missing millions.
London Quantum had two ‘life cycles’, according to the TPR.
Cash invested in car parks and hotels
The first was between 2012 and 2014, when pension funds worth £600,000 were transferred out to three members. The TPR suspects this was pension liberation although London Quantum claimed the cash was invested in a firm called VIP Messaging.
London Quantum said the investment would offer higher returns for retirement savers.
The second cycle was from 2014 onwards, when the number of scheme members jumped from three to more than 90.
This was when introducers were paid commission to find clients.
The TPR explained an authorised IFA in Bristol managed the introducers and was paid fees of £220,000 for proving clients with documents about the scheme
Pension cash was invested in nine investments – including car parks in Dubai and hotels in Cape Verde.
The TPR says these investments were ‘highly illiquid’ and ‘promised implausibly high returns’.
Some of the hotel investments involved profit-sharing rather than ownership that were run along the lines of a scam warning made by the UK’s National Fraud and Cyber Crime Reporting Centre.
“TPR found that the trustees had a serious disregard to the obvious risks that members might be misled about the true nature of the investments held by the scheme and the risks that came with those investments,” said a TPR statement.
The Cape Verde hotel scheme was subject of a recent BBC TV Panorama investigation that secretly filmed unauthorised advisers cold-calling pension savers.
The documentary did not involve London Quantum but a firm called The Resort Group features in both inquiries. The Resort Group is not accused of any wrongdoing.