Dalriada Trustees has warned investors who tried to unlock their pension fund early through pension reciprocation plans that “significant” losses are “inevitable” as spiralling costs eat away at members’ pensions.
Money Marketing first warned about the risks of investing in pension reciprocation plans in May. The schemes claim to allow people to borrow up to half of the value of their pension fund before age 55.
In June, Money Marketing revealed The Pensions Regulator had appointed independent trustee firm Dalriada Trustees to seize control of the bank accounts of six schemes used for pension reciprocation due to concerns the loans could be legally void.
In July, a High Court judge froze over £1m of fees charged to members of pension reciprocation plans administered by Ark Business Consulting and two related entities.
In a memo sent to members earlier this month, seen by Money Marketing, Dalriada reveals details of the investments made by the schemes’ trustees.
It says the trustees put members’ money into three property investments, Freedom Bay, Cyprus and HYPER, and these have “no realisable value”.
It says Freedom Bay and Cyprus are property developments where construction work has yet to begin, while HYPER is described as a property unit trust that has not yet been listed on the Channel Islands stock exchange.
It says the nature and present value of an additional £1m investment in Entrepreneurs Capital Holdings have yet to be established.
Dalriada’s legal and administration costs are being met from members’ pension funds.
Dalriada says: “There have been significant costs incurred at the outset of Dalriada’s appointment and unfortunately we expect these costs to remain at a high level. Significant reductions in members’ benefits, relative to the amounts transferred in, are inevitable.”
A court hearing to determine the legal status of the pension loan arrangements is expected to take place by early December.