Regulators are warning pension investors that their money may be at risk in a possible pension liberation scam.
As many as 100 retirement savers have invested almost £4 million in a self-invested personal pension promoting shares in a company called Emmit plc.
The Financial Conduct Authority (FCA) is warning investors that several pension firms concerned that retirement savers may lose their money in the scheme have tipped off the watchdog.
Share dealing in Emmit is now suspended on the AIM market of the London Stock Exchange.
The shares were trading at 6p in December, but had risen to 97p after falling from a 200p peak earlier in the year.
Cash incentive to buy shares
A review of the company shows Emmit is valued at £17.8 million, but the latest unaudited interim accounts in June showed the company did not have enough assets to cover liabilities.
The FCA has released the alert after finding that inexperienced investors were urged to switch cash from workplace pensions into a SiPP. Advisers then suggested all their pension cash should be spent on Emmit shares in return for a cash back.
Investors were told the shares were good value as they normally traded at a higher price and that buying the shares would result in an immediate cash payment of 30% of the transfer value of their pension fund.
“Some investors have put all their transferred pension money into this scheme and could face losing all their savings if they do not understand how the scheme works and the nature of the investment,” said an FCA spokesman.
“As well as this concern, the cash incentive may well be seen as an unauthorised pension payment which is taxable at 55%.”
Demand driving share prices
The spokesman went on to say that the demand from retirement savers buying Emmit shares has significantly contributed to the rising price of the shares.
The FCA added that no evidence suggests anyone connected with Emmit plc is involved in the suspected pension liberation scam. The firm is an investment company.
The FCA has warned SiPP providers that they must carry out due diligence on high risk investments sold to retirement savers a number of times.
“We are grateful several SiPP operators have brought this matter to our attention so we can alert investors of the risks they are facing,” said the spokesman.
Emmit investors or advisers who believe they could help the FCA inquiry should contact the regulator on 0800 111 6768.