Lessons to learn from Dolphin Trust


18 months after its first program, Radio Four’s You and Yours program has produced a second program on Dolphin Trust (aka the German Property Group). You can listen to the second program here

As I’d followed up on the first report, I got asked to speak this time around. Sadly, the timings got mixed up so I’d only just started my carefully timed Spiegel when the program ended and I found myself talking on Facetime with no one listening!

I’d done the research and answered the program’s exam question “what lessons can we learn” from the debacle. The answer, in a simple phrase, is that if it looks too good to be true , it almost certainly is”. Dolphin looked and was too good to be true

Too plausible

Vorsprung durch technik and all that, Dolphin was a group of  German property company that had an all too perfect pitch, German companies don’t go wrong and this was based on the Grand Designs model – turning fabulous run down East German properties into desirable residences for the newly minted East German middle class.

Too much easy money

As if German property wasn’t exciting enough, the sauce was spiced with a healthy dose of German tax-payer’s money, lined up for anyone who wanted a “no-brainer” investment.

Too easy all round

Dolphin Trust was formed to provide two and five year bonds, with guaranteed exits and interest payable on terms that were at least four times what you could find on the high street. Investors could feel like savers, they were just smart enough to use the compelling combination of German Property with tax incentivized returns.

So why did this need to be sold at all?

The question that I asked in my last blog and ask in this, is why what seemed like a no-brainer needed to be sold with introductory fees of 20% or more? Surely this could sell itself with the developers taking their slice. What was wrong with German banks – why were the developers seeking crowd-funding in Singapore, Britain and other property mad countries.

The answer is that the developers did not want to develop, even when they got the builders in, they didn’t pay them. According to the joint investigation by the BBC and its German counterpart, what little building work that was commissioned wasn’t paid for.

In July 2020, German Property Group began filing for bankruptcy in Germany. It is estimated to owe at least £1bn to investors worldwide and at least £378m is thought to have been invested by people in the UK.

You can read the sad tales of those who lost out on the BBC website or listen to them on BBC Sounds but you may by now be weary of these stories, for the template is always the same and lessons are not being learned.

What lesson needs to be learned?

The lesson is in the returns you are actually getting on your pension savings. If you ask most people what a reasonable long-term return should be , you will probably get a default of 8-10%. Those numbers are hard-coded into our imagination. They were the numbers we learned from the 1980s and 1990s for that is when most people who Dolphin targeted were first saving into pensions, or PEPs or (later) ISAs.

But the actual returns most people have been getting since inflation was turned off at the turn of the millenium has been much lower. The average pension default fund has been returning around 3.5% pa since 2000 after all charges. Some have done  better

Some have done worse

The first data set shows returns from 2004 (where on average people have been getting 3.29% and the latter from 1997 (where on average people have been getting 5.91%.

Returns since 2010 have been comparable, despite our being in a bull market for shares and bonds, people have struggled to achieve an average net return of more than 5% in almost any of the large data sets we have analyzed.

The reality is that generally available 8-10% returns on 2 or 5 year bonds, live only in the imagination and the returns offered on Dolphin Trust bonds are – to those who study the facts – unimaginable.

There is a simple lesson to be learned from Dolphin Trust. When organizations are offering returns above the market rate, even with tax advantages, there is risk involved and if you can’t identify the risk, the risk is you are being scammed.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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