The perils of propping up a pension

As a Gateshead-based company goes into receivership, hundreds of investors are left counting the cost, says Christopher Browne

Lecturer Leonard Roberts and his wife Diane were excited about their retirement. He had just had a large pay-off from his university post and the couple were looking at attractive ways to invest in their later years. Then Mr Roberts saw an advertisement for buy-to-let properties in the North-east. The package was enticing – eight houses for £184,000 and guaranteed rental income of £28,000 a year.

The couple visited the scheme's backer, Practical Property Portfolios (PPP), at its Gateshead headquarters and signed up. They were reassured by the fact that the company was advertising in the national press, including The Independent. They returned home, confident that they could now plan for a far rosier future than any dwindling pension plan could give them.

PPP informed them it had bought them eight terraced houses in Burnley. Soon the properties would be refitted with new kitchens, bathrooms and furniture. They would then be let to new tenants, many of whom were DSS claimants whose rent was paid by the council. All voids, or empty spells, were covered by insurance, said the company.

The couple sat back and waited for their houses to be revamped and the rent cheques to roll in. And they waited, and waited, and waited. Five months later, they lost patience. They discovered that none of the houses to be refitted, which had cost them almost £100,000 in total, had been touched. Only two of them had been let.

Then Mr and Mrs Roberts were asked to pay a monthly council tax bill of £200 for the six tenantless properties by the local authority. "Three of them were boarded up because of hooliganism and PPP even had the cheek to charge me extra boarding-up fees," adds Mr Roberts. "Now I have been told by local Burnley estate agents that they are worth about £2,000 each, even though PPP told us they paid £10,500-£12,000 for each of them. I have spoken to other investors who discovered their investments were hardly more than holes in the ground."

Leonard, 54, who lectures in business studies and is a respected financial forecaster, admits he and his wife were taken for a ride. "I thought this one was safe as we were covered by rent-guarantee insurance. This was going to be our pension plan. But instead, we face financial ruin."

Mr Roberts and his wife are only two out of hundreds of investors who have been caught out. Another investor is Eunice Goodwin, a graphic designer from Okehampton, Devon. She paid PPP £21,000 for her buy-to-let package. "It seemed a great way to prop up my pension, so I cashed in some PEPs and ISAs and sent off the money," she says.

When Ms Goodwin, 54, visited the house, on the outskirts of Middlesbrough, she found a shell "with no white goods, furniture or carpets, no bathroom fittings, no glass in the windows, peeling paintwork and black mould on the ceiling". She had paid PPP £7,500 for the refit. "They couldn't have spent more than £500 on the work," says Mrs Goodwin, who was later told by West Middlesbrough Council the house had been deemed unfit for human habitation and was about to be demolished.

Although her house was never let, Ms Goodwin received "rental income" paid from an insurance guarantee she bought from PPP for £1,000. "It was easier for them to pay and not explain."

North London investor John Rennie paid PPP £40,000 for two houses in Bishop Auckland, near Gateshead. He later discovered PPP had bought them for £12,500 and £9,000 apiece "plus about £1,000 each for a very poor patch-up and redecoration job".

When he only received a few rental payments, Rennie confronted PPP and insisted they bought one of the houses back. "But I still lost just over £10,000," he says.

On 13 March, PPP's house of cards collapsed. After a two-month DTI investigation, the official receiver seized control of PPP and two associate firms, PPP International and Napeer Holdings. The companies now face a winding-up order on 30 April.

But 13 March turned out to be a lucky day for Paul and May Whitty. That morning, PPP had received their £80,000 banker's draft for three properties. A few hours later the department phoned the Whittys to tell them they were returning the cash as the company was in receivership.

Mrs Whitty, from Southgate, north London, says: "We were met by one of PPP's Jaguars at Newcastle airport, and the whole operation seemed plausible. We are just so relieved we got out in time."

If you were a PPP investor, you can contact a support group of 350 PPP clients on www.pppsupportgroup. co.uk or phone 07813 806123.