Land banking investments sound like a smart concept; buy up a piece of land on the cheap, safe in the knowledge that your land will be increasing in value in the not-to-distant future as developers eye up where to build on next.
Investment firms are keen to tell prospective investors of the potentially huge returns available from their land-banking investments.
But they’re often slow to tell those same investors that land-banking is high-risk, unregulated by the watchdogs at the financial conduct authority, and in some cases, might be an outright scam.
Land Bank Scams & SIPP Pensions
Many people have received phone calls out of the blue about their pensions, with offers of a ‘free pension review’ – a chance to take stock of their current pensions and see if they can generate more money in retirement by moving them elsewhere.
Ever hear the saying about “getting something for nothing”?
Many of the marketing companies making the calls (whilst appearing unbiased) were set up to pump investment money into high-risk investments, sometimes Land Banking schemes.
In many cases, the land-banking scheme would be presented, and the client would be advised (sometimes by an actual financial adviser) to invest in it via a SIPP: Self Invested Personal Pension.
As the FCA points out on their blog, many investors often weren’t properly informed about restrictions on the development of land, or even that the land was protected!
In some cases, follow-up scams would call up to ask for even more money to settle the holding, and in other cases, the same patch of land was sold multiple times to multiple people.
High-Risk Investments.
Even if the scheme is not a scam, land banking investments are still high-risk. Because they are not FCA regulated, the watchdog is not peering over their shoulder, and it means that the investor has little to no access to the Ombudsman or FSCS if they want to complain about the investment itself.
For a financial adviser to consider a high-risk investment like a land-bank suitable for their client, they should be checking that they are a High-Net Worth Individual (earning over £100k per year, or with £250k of investible assets), and/or a sophisticated investor with a wealth of knowledge and experience about investing.
This is because such a person has enough money to be able to risk their pension in such an investment, AND understand the risk they are taking.
Anything less, and they may have mis-sold the land-banking investment, and the pension as a whole.
£millions In Mis-Sold Pensions.
Hundreds have been mis-sold their land-banking investments through SIPP pensions, and maybe hundreds of thousands have been mis-sold other high-risk investments in their pensions, such as overseas property, forestry schemes, and more recently corporate bonds with risky underlying investments.
Most people are yet to realise that they have potentially been mis-sold high-risk investments such as lank-banks through their SIPP, but they can check their investments through a simple internet search. It might just save their retirement!
Tom Iveson works for claims specialists Get Claims Advice and often writes about mis-sold pensions and SIPP.