Cross-border financial services provider STM Group is to acquire Carey Administration for a maximum consideration of £400,000 ($523,250, €455,285), which will see the firm enter the UK auto-enrolment space.
Carey majority owns two businesses; 70% of Carey Pensions UK, which offers a number of self-invested personal pension (Sipp) administration products; and 80% of Carey Corporate Pensions UK, which provides auto-enrolment (AE) workplace pension solutions.
The remaining 30% and 20% stakes will continue to be held by the remaining chief executive of Carey Pensions, Christine Halley.
She has, however, entered into a three-year option agreement with STM for it to acquire her stakes.
High-profile court case
Included in the announcement was an acknowledgement from STM that Carey Pensions is party to a high-profile court case – the Adams’ case.
It has been locked in a dispute with an individual named Russell Adams, who claims the firm mis-sold him a Sipp in 2012.
STM said it “has secured indemnities and the benefit of significant existing [professional indemnity] cover from the sellers and considers any residual expose to this, and any other historic industry, issues to be minimal”.
Automatically enrolled in a pension
According to STM, Carey’s AE business currently has over 65,000 members and is expected to deliver revenue of around £1.5m for the financial year ending 31 December 2018.
“The UK AE market is undergoing considerable consolidation a part of the upcoming [The Pensions Regulator (TPR)] authorisation process – and presents an opportunity for STM to accelerate its growth strategy by acquisition,” the company said.
AE was introduced following government concerns that too few workers were putting money into a pension. Unveiled under the Pensions Act 2008, it became a requirement for larger companies with more than 250 employees in 2012.
It has since been rolled out in stages across the UK, becoming mandatory for all companies from 1 October 2017.
Sipp businesses bolstered
Carey’s UK Sipp business offers complementary products to STM’s existing range, the company said.
It adds 4,000 members to STM’s circa 3,000 UK Sipp clients and expands the firm’s UK introducer network.
Carey will benefit from STM’s online application processes; while STM expects to see significant savings of around £500,000 per annum across the two Sipp business once fully integrated.
The Carey business will be rebranded within six months of completion.
“As an enlarged Sipp group, STM will be unique in offering Sipp products to both the UK and expatriate market,” the firm said.
Prohibitive cost of entry
STM chief executive Alan Kentish commented: “The integration of the two similarly sized Sipp businesses will give us some straight-forward integration savings and make the enlarged Sipp group much more efficient.
“We have seen this previously in both our London & Colonial and Harbour acquisitions. In addition, it helps us to offer niche Sipp products to the UK market with minimal financial outlay.
He added: “The Carey auto enrolment business is particularly interesting, given the changes that are occurring within the sector that will almost certainly lead to consolidation amongst the providers.
“The cost of entry is prohibitive to new entrants from a standing start given that all staging dates have now passed; so that leaves only a limited number of providers in an ever-expanding market.
“In a similar manner to Carey, we must ensure we offer a more personal service approach to advisers and employers, so as to be able to differentiate ourselves from the larger providers in the sector,” Kentish said.
