For many people, it all sounded too good to be true. Investing in villas and hotels in exotic places like the Caribbean and Brazil, with promises of returns far in excess of what their normal pensions would provide. By transferring their pension to a Self-Invested Personal Pension (SIPP), customers would see huge profits very quickly. Sadly, it is clear 1000’s of investors have lost hundreds of millions of pounds on this “investment” and money they thought was safely invested for the future has disappeared. The consequences for this have been significant for everyone involved.
Alarm was first raised about the investment when the then regulator the Financial Services Authority (FSA) sent an alert to financial advisers about the investment. It stressed the FSA expected “advisers to have undertaken thorough due diligence on the various developments being sold through Harlequin Property to fully satisfy themselves that it is a suitable investment”.
The Serious Fraud Office has highlighted that the sales took place between January 2010 and June 2015. In this time, customers would be convinced to withdraw their pensions from their current arrangement and transfer into a SIPP, which would be invested with Harlequin Properties. Many people were sold the investment through cold calling- people rung up out of the blue, promised that they could make thousands of pounds by only transferring their pension. They would be put in contact with a financial advisor who would transfer the money to the SIPP, and the returns generated by the invested would be passed on to the investors.
The investment would be used to buy property at various locations in the Caribbean, and would in theory be put towards building luxury resorts and villas. The investors would see a return from the rental profits made at the resorts. However, barely any of the resorts were built and the company ultimately went into administration. The value of the investment has become, effectively, zero. Investors are also still potentially liable for costs related to running the SIPP as well.
The fallout for this has been huge. Thousands of people have been affected, and the former chairman has been in court on charges of fraud. The amount of money that has been lost is staggering. We are still seeing the remifications of this today. Cases continue to appear before the Financial Ombudsman Service, and pay-outs continue to be made. Claims largely are against the financial advisor who set up the SIPP- they should have fully assessed a customer’s circumstances and ensured a SIPP was the correct product for them. Often, this was not the case.
Even if the financial advisor is no longer in business, claims can potentially still be made, by referring the claim to the Financial Services Compensation Scheme (the FSCS). Recent cases have shown that financial advisors will be held liable for losses incurred if their advice was deemed negligent, even if another person initially introduced the idea of transferring the pension to the customer (such as a cold caller).
Understandably, many people who have invested into Harlequin, through SIPP’s or otherwise, could have fears they’ve lost all the money invested. But the way the FSCS are dealing with claims from individuals who held SIPP’s that contained Harlequin investments shows there are ways of getting at least some of that money back.