Incredible returns and amazing growth in alternative investments. Who wouldn’t want that for their pension benefits? But all is not as rosy as it may seem, explains Gary Crockford, Head of Knowledge and Research
Cape Verde is a country comprising a number of islands some 500km off the West Coast of Africa. Colonised by the Portuguese in the 15th century, it prospered from the Atlantic slave trade, attracting merchants, privateers and pirates. Sir Francis Drake stopped by to sack the then capital a couple of times in 1558. Today, Cape Verde is a centre for tourism. A great climate and a reputation as the most stable democracy in Africa mean that the future looks rosy for this particular set of islands. A fact that has not gone unnoticed by a number of pension and investment fraudsters.
The National Fraud Intelligence Bureau (NFIB) has just issued a “Pension Scam alert”, warning members of the public (particularly in their 50s or 60s) to beware of firms offering investments in alternative commodities such as hotel development or property in Cape Verde. Suspect firms, often cold calling “pension companies”, who are not regulated by the Financial Conduct Authority (but who call themselves “trustees”, “consultants” or “independent advisers”), are offering eye watering returns in both capital and investment growth in alternative investments. We have seen glossy brochures offering capital growth of 6% per annum and an annual return on investment of close to 12%. Who wouldn’t want their pension pot to increase in size at that sort of rate? The problem, say the NFIB, is that “if the offer seems too good to be true, then it generally is.”
Victims are often encouraged to set up Small Self-Administered Schemes (SSASs) for their pension benefits. There is nothing fundamentally wrong with setting up a SSAS as long as the effects of doing so are fully explained to you. However once the SSAS has been set up and the pension benefits of a member transferred to it, the benefits are then invested in investments, such as property in Cape Verde, which either doesn’t exist or which isn’t worth what a member has been promised. Many victims of this fraud may take years to discover their benefits have disappeared or are, at best, worth a lot less than they originally thought. There can be reluctance in some people to actually accept they have been fooled. Discovering you have lost all your pension benefits can be devastating and according to the regulators has led to at least one suicide.
Anyone thinking of investing their pension benefits in alternative benefits, and particularly in Cape Verde property, should take advice from an adviser authorised by the Financial Conduct Authority and should be wary of firms which cold call or put pressure on them to sign documentation quickly. It might cost money to take proper advice, but the alternative could be to lose the whole of your pension benefits with no comeback should it turn out you have made a life changing mistake. If they really thought they could safely get capital growth of 6% per annum and an annual return on investment of close to 12%, the trustees of your existing pension schemes would already be investing in such options. As a trustee of a defined benefit arrangement, despite reading the glossy brochures, I think I will give this “once in a lifetime” opportunity a miss. I don’t need a regulated financial adviser to tell me that it’s as fishy as Cachupa, a slow cooked stew of corn, beans and fish which is popular on Cape Verde.