International financial services provider STM Group has created a reserve of £21.4m ($27m, €25m) to pay for any potential compensation to clients, following the dismissal of the Adams v Carey Pensions (now Options UK) appeal by the UK Supreme Court in April 2022.
The move was agreed after consulting with the firm’s professional advisers, auditors and professional indemnity insurers.
Chief executive Alan Kentish said in the company’s 2021 results that the court refusal to appeal the case has no direct financial impact on STM “due to its ability to recover under the professional indemnity insurance in place at the time, but it has meant the business has made a provision for similar fact cases”.
He added that the Carey case has caused great uncertainty for the UK pensions market especially in relation to the duties of Sipp providers.
Kentish said: “The Adams case is very specific to the actions of what an unregulated introducer may or may not do. There remains uncertainty in the industry, such uncertainty is unhealthy for all stakeholders, including consumers, and has resulted in increased costs such as professional indemnity insurance which are invariably passed on to the pension member. Naturally, STM as well as the pension industry, would welcome further clarity in this area.”
On the move
The chief executive also announced that STM chief financial officer Nicole Coll has decided to step down from her position to focus on her non-executive director roles.
She took over the role from Therese Neish in October 2021.
Coll will hand over responsibilities over the next few months as the board looks for a replacement.
Kentish said that, in her time at STM, Coll has “significantly contributed to the strategy and development of our optimised operating model”.
STM Group reported revenue of £22.4m for the financial year ending 31 December 2021 – down from £24m the previous year.
The firm said the reduction is largely due to the sale of its Jersey-based company and trust business.
This follows a “frustrating” H2 with revenue down £400,000, the company reported in November 2021.
The pension administration arm “continues to be the lifeblood of the group”, STM said, reporting total revenue of £17.6m – compared with £16.5m in 2020 – and accounting for 79% of total group revenue – up from 69% the previous year.
The largest revenue generation is the firm’s Qrops administration business, the firm said, despite slightly lower revenue levels in 2021 of £9.7m compared with £10.1m in 2020.
The Sipp businesses – Options Personal Pensions and London & Colonial Services – took a small hit as revenues fell to £3.2m from £3.5m in 2020.
The life assurance side of the business also generated lower revenue than in 2020 – £3.4m from £3.7m. STM said that, while it saw “some new business materialise through the launch of the flexible annuity products, this growth has made up for the loss of fee income due to natural attrition on the existing client portfolios”.
Kentish added: “Whilst our existing recurring revenue has held up well, it has been frustrating that the significant amount of work and change occurring in the background has not yet resulted in the improved margins or new business growth anticipated.
“The appointment of a centralised head of distribution in October 2021, is a step change that is expected to bring about several new partnership relationships which will expand our existing product distribution.
“Operationally 2021 has been another very busy year, with the completion of major IT migrations. STM now operates all its personal pension businesses on one core in-house administration system.
“There remains further development work required before we expect to see the full benefits of this initiatives. Further we are looking to optimise various functions across the business to avoid duplication and to become a more agile and forward-looking business.
“The board remains fully committed to our acquisition strategy and see this as an important pillar of our overall growth aspirations. Focus will be on UK based acquisition targets.”