Forestry investments have dominated the headlines for a while now – and not for the right reasons.
Take, for example, the scandal surrounding Liberty SIPP Ltd.
Since 2018, this UK-based SIPP (self-invested personal pension) provider has received hundreds of pension claims relating to high-risk, non-standard forestry schemes – including Ethical Forestry, Global Plantation Investment, and Forestry Sustainable Timber Investments.
The ombudsman ruled against the provider earlier this year, stating that it had breached its duty of care to investors and failed to identify the risks. And as such, it’s become known as a ‘landmark case’.
What’s more, due to the sheer volume of claims, the FCA (Financial Conduct Authority) has now advised the firm of its insolvency. To protect its former customers, on 27th April 2020, it was announced that Liberty SIPP Ltd had officially gone into administration.
A spotlight on forestry investments
With so many people affected by this case – and others surrounding forestry schemes – we thought it was about time we explored forestry investments and discuss whether they’re ever a good idea.
What is a forestry scheme?
A forestry scheme is a type of investment, most commonly included in a SIPP.
Essentially, pension funds are used to buy a patch land – typically overseas – where trees are grown. Once these trees have fully-matured, they’re harvested and sold. Any profits (in theory) go back to the original investor. Then, new trees are planted in the same place and the process starts again.
What are the pros and cons of a forestry investment?
Admittedly, forestry investments do have a number of advantages.
For example, there’s a huge global demand for timber; and, over the years, forestry has proven to be a consistently strong performer. It’s also counter-cyclical. Which means, even if the economy is in a downward cycle, the trees will continue to grow and returns shouldn’t be affected. What’s more, it’s regarded as a ‘green’ and ethical investment that can help to combat global climate change.
All sounds promising so far, right? However, these pros are offset by one major disadvantage – investing in forestry is risky.
All SIPPs, of course, have some level of risk; but forestry schemes can be particularly perilous. By their very nature, they’re an illiquid asset. The real profits are made when the trees are fully-grown and can be harvested. Yet this can be at least 10-15 years after the initial investment. To balance income and growth, you therefore need to have a portfolio of forests with different maturities.
Forestry investments also rely on many uncontrollable factors to be successful, including weather conditions, pests, disease control and even political regimes. Take, for instance, Ethical Forestry – the scheme involved with Liberty SIPP Ltd. Based in Costa Rica, this plantation was devastated by a hurricane and all trees (and investments) were lost. However, it’s investors were completely unaware that hurricanes were common in that area – and, as such, had been mis-sold.
Forestry investment pension claims
Unfortunately, many people have been mis-sold forestry investments in recent years, persuaded to move their hard-earned pension pot into a non-standard scheme. In most cases, these people have been misled regarding the level of risk, either intentionally or thanks to a lack of thorough due diligence. Others have been pressured into the sale, deceived about hidden costs, tax avoidance, and more.
Think you may have fallen victim?
If your pension was invested by Liberty SIPP Ltd, or you believe you may have been mis-sold a forestry investment, don’t panic. There are definitely things you can do to help resolve the situation.
Claims can be made for free directly to the Financial Ombudsman Service (FOS), the Pensions Ombudsman (TPO), or the Financial Service Compensation Scheme (FSCS). If you have it, you can claim on your personal insurance for financial mis-selling. Alternatively, if you would like a little expert advice and direction on the matter, you can recruit the help of a claims management company – such as Money and Me Claims.
Having worked in the pension industry for many years, our team have excellent knowledge of forestry investment schemes – particularly those which have been sold unfairly. Not only can we advise on your eligibility to claim, we can take care of the full claims process on your behalf, and will do everything in our power to get you any compensation that you are owed.