Aim listed pensions provider STM Group says it has agreed to pay up to £400,000 to buy a majority stake in embattled Sipp provider Carey Pensions.
An update from STM this morning says it will acquire Carey Administration Holdings, which owns 70 per cent of Carey Pensions and 80 per cent of Carey Corporate Pensions, subject to regulatory approval.
Carey Pensions claimed it did not break conduct of business rules when it set up a Sipp for a client during a High Court hearing in March. In the case lorry driver Russell Adams alleges Carey Pensions missold him a Sipp in February 2012, when he was paid an inducement of £4,000 into his savings account to encourage him to put money into rental scheme Store First.
The case is seen as a pivotal ruling on whether Sipp providers should take responsibility for unsuitable investments.
STM says it has secured indemnities and significant existing professional indemnity insurance cover from Carey, and believes its exposure to the court ruling and any other historic industry issues to be minimal.
Carey’s Sipp business has over 4,000 members and is expected to deliver revenue of approximately £1.8m for the year ending 31 December 2018.
STM Group chief executive Alan Kentish says the integration of two similarly sized Sipp businesses will make the enlarged Sipp group more efficient and help it offer niche Sipp products to the UK market.
The deal will enable STM to enter the auto-enrolment market via Carey’s workplace proposition, which is expected to deliver revenue of approximately £1.5m for the financial year ending 31 December 2018.
Kentish adds Carey’s auto-enrolment business is particularly interesting given consolidation and the cost of entry being prohibitive to new entrants as all auto-enrolment staging dates have now passed.
The remaining minority interests in the subsidiaries – 30 per cent in the Sipp business and 20 per cent in the AE business – are held by the existing Carey Pensions chief executive Christine Hallett.
She has entered into an option agreement with STM for them to acquire those minority interests on a pre-agreed basis. The option agreement is valid for three years and will allow STM to become the 100 per cent owner of these subsidiaries once triggered.
Hallett told Money Marketing the deal will not be affected by whatever the court’s ruling says as STM has done thorough due diligence on Carey.