The sustainable energy sector is an attractive investment option to many people. Not only is it a sector that many believe will grow, there is also an ethical element to the decision, i.e. doing something that's good for the environment and contributing to making the planet better for younger generations.
For these reasons, many people have bought into the sustainable sector by investing in biofuels – such as green oil – using a SIPP, or self-invested personal pension. However, many of these schemes have gone horribly wrong, costing the pension holders a significant portion of their savings.
What's Wrong with Biofuel Investments?
Biofuel investments are typically suitable for high net worth individuals and individuals who have a lot of experience investing. As a result, they are not usually suitable for the average SIPP holder.
There are two main reasons for this. The first is the fact that biofuel investments are unregulated. This means they do not come under the remit of the Financial Conduct Authority (FCA), the organisation responsible for ensuring you, as a pension holder, are protected.
The second reason that biofuel investments are unsuitable for most SIPP holders is they are high risk. Any guarantees or promises of returns for such investments are almost always pie-in-the-sky. Transferring your pension into a SIPP and investing it in biofuels can result in losses.
The Tax Element
There is an additional problem with some biofuel investments that created further issues for some SIPP investors – tax. More specifically, some people were convinced to invest in a biofuel scheme for tax reasons rather than because it was a better pension than what they already had.
The Elysian Fuels Example
A good example of how biofuel SIPP investments can go terribly wrong is Elysian Fuels. It was involved in producing renewable fuels both in the UK and abroad. The minimum investment was £50,000 and it's believed up to £200m was invested in the company. Not all of those investors were SIPP holders, but many were.
Essentially, SIPP investors who put their money into the scheme were investing in shares in the company Elysian Fuels. If it succeeded, they would, theoretically, receive a healthy pension. If it failed, they’d lose the lot.
Unfortunately for the SIPP investors in this situation, Elysian Fuels went into liquidation and they lost everything.
In addition, Government authorities, including HMRC, started investigating.
What You Can Do
If you invested your SIPP in Elysian Fuels or a similar biofuel/sustainable energy scheme, you may have been mis-sold by your financial advisor. Your next steps are to get professional advice on what you can do to get your money back.
What if you want to protect yourself from investing in schemes like Elysian Fuels in the future? Here are some tips:
- Check the list of investment products on the FCA website that are unregulated
- Check the FCA's warning list of specific products
- Be very wary if you receive a cold call
- You should also be wary of big promises such as fast returns or very high returns
- Check the financial advisor/company recommending the investment is regulated by the FCA
Deciding to transfer your pension to a SIPP and then investing that SIPP is one of the biggest decisions you’ll make in your life. Don’t let biofuels or other unregulated, high-risk investments damage your financial position.