Thousands of British pensioners in Spain have been duped out of their money by unscrupulous financial advisers, according to an investigation published today.
The pensioners - often in their 80s and 90s - have been persuaded to give up huge stakes of their property in exchange for investments that never make a penny, according to an investigation by Money Mail.
The vehicles sold include investments and equity-release schemes outlawed in the UK. These pay high commissions that can net salesmen £50,000 per sale.
Banks offering equity-release loans included Icelandic bank Landsbanki, Scandinavian banks Nordea and Sydbank, and UK private bank Rothschild.
Many of the victims have borrowed the entire value of their property at an interest rate of up to 6.5% meaning that, after ten years, a €500,000 (£412,667) loan would balloon to €681,240 (£562,251).
To offset this, a large chunk - around 75% of the loan - would typically have been invested in a fund sold by the adviser.
Pensioners were told returns would be so good that not only would they cover the interest on the equity release, but they would provide a little extra to spend.
However, the returns rarely covered the cost of the interest repayments on the equity release. And as the fund fell in value, it ate into the capital that borrowers needed to repay the debt. Charges for fund managers and commission also reduced the returns further.
The rogue financial advisers often exploit weak consumer laws on the Continent by falsely claiming to be bona fide accountants.
John Parsons, founder of the Costa del Sol Action Group, a body helping some of the victims, said: ‘The stress has brought on a lot of serious health issues and [many of these pensioners] are extremely worried about their futures."
Pension savers need to engage with their retirement options far earlier than is currently normal to ensure they save enough through their lifetime, according to a report from the Association of British Insurers (ABI).
The majority of financial advisers (85%) believe the number of self-invested personal pension (SIPP) providers will continue to fall in the coming year, according to Dentons Pension Management research.
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