BUSINESS owners are being warned to be wary of a "funding solution" for their businesses which could put their personal pensions at risk.
The scheme works by identifying intellectual property (IP) within the business, obtaining an independent valuation of the IP, and using the owner's Sipp (self-invested personal pension) to buy it in the same way as it might buy a property.
But according to Gordon Forbes at Caledonia Asset Management in Edinburgh, creating a value for IP within a business could create a new tax liability, and it also raises regulatory and investment questions.
Loading article content
"Unlike the process of pension funding of a tangible asset such as commercial property, where there is an identifiable and separate secondary market on sale, this cannot be said of IP – so in this case the pension-holder is putting their pension at very serious risk," he warned.
He said investors approaching his firm for a second opinion had been invited to transfer all their existing pension pots into to a Sipp, involving "very substantial" fees, and added: "There are plenty of examples of this type of manoeuvre leaving a Sipp virtually worthless after unsuccessful attempts to gain liquidity from the 'sale' of the so-called IP in future.
"Indeed, the most recent alert from the FSA on regulated Sipp advice in relation to unregulated investments generally, makes it clear that investors should be aware of the pitfalls of such a strategy for their pension."
The Herald reported this week that Bristol-based Clifton Asset Management staged a Glasgow seminar to promote a strategy involving IP and pensions, claiming it had the potential to create "£100 billion of funding" for small businesses starved of bank funding.