Serious Fraud Office warns of £120m pension scam
Fears are growing that large numbers of people may have lost huge sums of money after investing their retirement pots in – of all things – self-storage units. The Serious Fraud Office this week launched an investigation into storage unit investment schemes, and revealed that more than £120m has been poured into them. But could that just be the tip of the iceberg?
One man was persuaded to transfer almost £370,000 out of his workplace pension and put it all into one such scheme supposedly offering an 8%-12% return. The Pensions Ombudsman, which looked at his case, said the “blameless” man had switched out of the “secure and generous” NHS pension scheme and may have lost all his money as a result. Others were lured in with claims that they could more than double their money in just six years.
Many of us have used a self-storage facility at some point – perhaps to temporarily stash our belongings when moving home. But what most people probably don’t realise is that these units (also known as storage pods) have been touted as a wonder investment with double-digit returns. Many people appear to have lost some, or all, of their retirement savings after falling for the spiel of firms flogging dodgy schemes.
The SFO says it is probing several, including Capita Oak Pension and Henley Retirement Benefit, plus some schemes that invested in other products. It adds that more than 1,000 individual investors are thought to be affected by the alleged fraud, though it presumably thinks the number could be higher as it is asking people who have paid into these schemes between 2011 and 2017 to complete a questionnaire available on its website.
Kate Smith, head of pensions at insurer Aegon, says the SFO probe “is a timely reminder that unregulated unusual investments at home or abroad come with a high risk that people could lose all their hard-earned pension and other savings”. She adds that it is possible that thousands more people may find they have lost money, too.
“Pension liberation” scams – where people are persuaded to transfer or cash in their pension pots and put the money into often exotic-sounding investments – have been around for years, but there has been a surge in activity since April 2015 when the government introduced reforms giving over-55s more freedom in terms of what they can do with their retirement cash.
Storage units on UK industrial estates might not have the exotic allure of hotel rooms in the Caribbean and palm oil plantations in Asia, but perhaps that was their selling point. Marketing tended to highlight how this was a profitable and growing industry.
One glossy brochure seen by Guardian Money offered the chance to buy individual units from £3,750-£30,000 said to be located in the north-west of England. The investor would buy the unit on a long-term lease from Store First Limited, and then sublet it to a management company which would subsequently rent it out.
The brochure, issued by a property investment company, boasted of a “14% average annual yield” and claimed that when capital growth and income were combined, the “forecast net return” over six years for someone investing £11,250 would be £12,180, “or over 108%” – equating to a total return of £23,430.
In December 2014, the Pensions Ombudsman published its decision in the case of “Mr X” who was persuaded to transfer his entire future pension – £367,601 – from the NHS Scotland scheme into Capita Oak. The ruling stated that Mr X was told his money would be invested in “Storefirst Limited” (sic), “a large self-storage firm in the north of England”. It was offering a 8%-12% return “and therefore it seemed a good investment”. He later discovered that he couldn’t get his money out.
The ombudsman said Mr X may well have been “duped” out of his entire pension, and it is not known whether he ever recovered any of his money.
In April 2015 the ombudsman published two decisions relating to a man called Joseph Winning, who transferred £52,401 in pension cash from Scottish Widows and Legal & General to Capita Oak. Winning’s money had apparently been invested in Store First storage pods, the rulings said.
Things don’t look good for Mr X or Winning (and doubtless others) because the two companies that acted as trustees to Capita Oak and Henley Retirement were wound up by the high court in July 2015. This was after an official investigation found that they were involved in a venture where people were cold called and persuaded to transfer their pensions “on the basis of misrepresentations made” concerning returns. The investigation found that the only investments offered to the public were storage pods marketed for sale by Store First, which paid commissions of up to 46% to another company which was part of the overall scheme.
It’s all been quite frustrating for the Self Storage Association UK, which describes itself as the main trade body for the industry. Its boss Rennie Schafer says investment companies have been aggressively marketing these unregulated schemes to small investors “who are less informed of their perils,” adding: “The idea of breaking it up into little pieces and selling it off is not how self-storage works.”
Store First, based near Burnley, told us: “The SFO investigation is not against Store First or its product of storage pods, but against the schemes named … Store First is in no way connected with the running of any pension scheme being investigated by the SFO or, indeed, any scheme. In addition, Store First does not carry out any direct sales activity, and all sales are made by third party intermediaries.”
The company added it had “no connection whatsoever” with any financial advice these schemes receive or give, or to their ongoing administration.