Setting up a SIPP to hold a fixed term bond?
Discussion
Of more concern I'd say is the likelihood of your investment going kaboom before the three years is up.
I'm no expert but:
'The Bonds are secured by a debenture over the assets of London Capital & Finance Plc. There can be no assurance that, in the event that this security is realised, the amounts realised will be sufficient to satisfy the obligations to repay principal and accrued interest under the Bonds'
'LC&F makes loans to Borrowing Companies and is reliant on these Borrowing Companies to repay the loans LC&F grants in order for LC&F to be able to make payments of principal and interest to Bond Holders. If a significant volume of loans fall into default, LC&F may not have sufficient funds to be able to pay principal and interest to Bond Holders within the timescales of the Bond.'
And three years is a long time in which things can go pear-shaped.
I'm no expert but:
'The Bonds are secured by a debenture over the assets of London Capital & Finance Plc. There can be no assurance that, in the event that this security is realised, the amounts realised will be sufficient to satisfy the obligations to repay principal and accrued interest under the Bonds'
'LC&F makes loans to Borrowing Companies and is reliant on these Borrowing Companies to repay the loans LC&F grants in order for LC&F to be able to make payments of principal and interest to Bond Holders. If a significant volume of loans fall into default, LC&F may not have sufficient funds to be able to pay principal and interest to Bond Holders within the timescales of the Bond.'
And three years is a long time in which things can go pear-shaped.
youngsyr said:
It's an asset backed fixed term corporate bond from an FCA regulated company, how much due diligence could possibly be required?
I am a sophisticated investor (ACA).
I doubt that as you don't understand what a SIPP is.I am a sophisticated investor (ACA).
Due diligence is required because a SIPP is regulated by the FCA and the SIPP trustee is legally responsible for the investment decisions it makes.
Just have a look at the Pensions Ombudsman's website to see how quickly Joe Public screams "compensation" when an investment they wanted (even insisted) goes tits up.
sidicks said:
youngsyr said:
Seems you don't understand what a Sophisticated Investor is either.
So why are you (apparently) oblivious to the regulatory requirements of the SIPP provider?
youngsyr said:
Because I haven't bothered to look them up, obviously. I was hoping that I could save some time by asking those PHers who work in the sector to give me a quick and straight-forward answer to a straight-forward question, but as seems to increasingly be the case on PH, the helpful posters are outnumbered by those trying to score internet points or make "witty" comments.
It's called banter and it usually leads to more productive posts.youngsyr said:
Because I haven't bothered to look them up, obviously. I was hoping that I could save some time by asking those PHers who work in the sector to give me a quick and straight-forward answer to a straight-forward question, but as seems to increasingly be the case on PH, the helpful posters are outnumbered by those trying to score internet points or make "witty" comments.
When seeking advice on a topic, my advice would be to avoid make snide comments about the industry in question, particularly where you don't really understand what you are talking about.That might produce a more helpful response...
youngsyr said:
Seems absolutely bonkers that I need anyone to be involved at all, to be honest - it's about as straight-forward a financial instrument as you can get, besides a wad of cash.
This is the bond provider:
https://www.londoncapitalandfinance.co.uk/
Why would I want due diligence, a custodian or a pension provider involved? Is this SIPP not just a "wrapper" I can put around the bond to make it tax efficient?
I am sorry to break to to you, but what you say above clearly shows you have no idea what you are talking about. This is the bond provider:
https://www.londoncapitalandfinance.co.uk/
Why would I want due diligence, a custodian or a pension provider involved? Is this SIPP not just a "wrapper" I can put around the bond to make it tax efficient?
The 'bond' provider is only registered with the FCA for consumer credit activities. The 'bond' is completely unregulated, does not trade on any recognised exchange, has no secondary market and is not covered by the Financial Services Compensation Scheme.
It is extremely high risk as you are lending money to this company at 8% so that they can lend it to other SME's at 12%-20%. If any of these companies defaults on either interest or capital it is you who is taking on board all of the risk. There is no guarantee you will even get your interest, let alone your capital back.
You want a Trustee involved for precisely these reasons and others - this is just from a cursory glance.
You want a pension provider involved because you want to hold the bond in a pension, presumably...?
I don't see why it seems "absolutely bonkers that I need anyone to be involved at all" when you want to to instruct a SIPP provider to make a very high risk loan to a finance company on your behalf.
Actually, youngsyr, now I have finished working today I would like to reply to you more fully.
You came here asking for help on a subject, obviously this means you did not know fully about the matter and you wanted people who did (and therefore, by definition, people who work in - or have a deep knowledge of - this sector) to assist you.
You insulted the companies in this sector and then did the same with people trying to help you.
You compounded this by claiming that you are a Sophisticated Investor (that is an regulated term, if you are unaware) when you evidently are not.
The 'bond' that you are interested in is nothing more than you loaning money to a SME (London Capital & Finance, formerly known as Sales Aid Finance (England) Limited) so that they can loan what was your money (but is now their money) to other SME's - with you taking all the risk of default (not them). This bond/loan is unregulated, unlisted, completely illiquid, and outside of the Financial Services Compensation Scheme.
You are giving your money to a company who will give it to another company and hope that this company pays them 12% to 20% interest and gives them (your) money back. They are also, effectively, charging you up to 12% p.a. for you lending them your money. If you consider this is 'plain vanilla' or the equivalent to you 'holding a wad of cash' you are easy pickings.
If you are an accountant then why have you not looked at last accounts of the company you are looking at lending £10,000 to? They have cash at bank and in hand of a whopping £165!
Are you seriously going to lend a company with £165 of cash an amount equal to their entire net (book) worth for 8% p.a. interest and with no equity and absolutely no capital guarantees or regulatory comeback...?
This is why you pay a professional Trustee (who understands their sector) to undertake due diligence (despite what you think, it is important). You may value it as being worth £0 but having had the the benefit of the very very basics here I must ask you if you will now proceed with this 'investment' (and also if you would do my tax return for free - after all it is only filling in some forms...
Seriously though, do you still think a SIPP provider/Trustee would register your application, set a a Scheme bank account for you (as they have to do) in your name, chase up any transfers (this takes weeks), apply for and allocate basic rate tax relief, research your investment options (as the Trustee is potentially liable for not doing so), report all interest/growth to HMRC every year and do everything else you ask of them for free (as you value this as being worth £0...?).
I have tried to be genuinely helpful in my response. I know it has been long winded, but honest.
You came here asking for help on a subject, obviously this means you did not know fully about the matter and you wanted people who did (and therefore, by definition, people who work in - or have a deep knowledge of - this sector) to assist you.
You insulted the companies in this sector and then did the same with people trying to help you.
You compounded this by claiming that you are a Sophisticated Investor (that is an regulated term, if you are unaware) when you evidently are not.
The 'bond' that you are interested in is nothing more than you loaning money to a SME (London Capital & Finance, formerly known as Sales Aid Finance (England) Limited) so that they can loan what was your money (but is now their money) to other SME's - with you taking all the risk of default (not them). This bond/loan is unregulated, unlisted, completely illiquid, and outside of the Financial Services Compensation Scheme.
You are giving your money to a company who will give it to another company and hope that this company pays them 12% to 20% interest and gives them (your) money back. They are also, effectively, charging you up to 12% p.a. for you lending them your money. If you consider this is 'plain vanilla' or the equivalent to you 'holding a wad of cash' you are easy pickings.
If you are an accountant then why have you not looked at last accounts of the company you are looking at lending £10,000 to? They have cash at bank and in hand of a whopping £165!
Are you seriously going to lend a company with £165 of cash an amount equal to their entire net (book) worth for 8% p.a. interest and with no equity and absolutely no capital guarantees or regulatory comeback...?
This is why you pay a professional Trustee (who understands their sector) to undertake due diligence (despite what you think, it is important). You may value it as being worth £0 but having had the the benefit of the very very basics here I must ask you if you will now proceed with this 'investment' (and also if you would do my tax return for free - after all it is only filling in some forms...
Seriously though, do you still think a SIPP provider/Trustee would register your application, set a a Scheme bank account for you (as they have to do) in your name, chase up any transfers (this takes weeks), apply for and allocate basic rate tax relief, research your investment options (as the Trustee is potentially liable for not doing so), report all interest/growth to HMRC every year and do everything else you ask of them for free (as you value this as being worth £0...?).
I have tried to be genuinely helpful in my response. I know it has been long winded, but honest.
Thread resurrection:
Watchdog freezes UK provider of mini-bond investments
There were at least a couple of other threads about these bonds, usually fractious once the merits were being discussed.
Watchdog freezes UK provider of mini-bond investments
There were at least a couple of other threads about these bonds, usually fractious once the merits were being discussed.
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