Rogue trustees to pay £880,000 redress bill

These include failing to obtain written investment advice before transferring people’s money into non-diversified, unsecured loan agreements, providing scheme members with “false information”, and profiting from their position as trustees.

Complaints by four scheme applicants, who said they were unable to access their pension funds and were concerned they had been lost altogether, prompted an investigation by the Pensions Dishonesty Unit.

Following this investigation, the ombudsman has decided to uphold the applicants’ complaints, which involved redress of more than £850,000.

In allowing these unauthorised payments to be made, Mr Green and Mr Stanley have committed maladministration

Anthony Arter, Pensions Ombudsman

In an outcome published on October 13, the ombudsman ordered the trustees — Paul Green and Michael Stanley — to pay £825,210 into the scheme, which represents the total in loan amounts, valued at zero, less the £33,469 that has been paid to members.

For “exceptional maladministration causing injustice”, the trustees have also been ordered to pay the sum of £6,000 to each of the four applicants. This takes the total bill to more than £882,000. Green and Stanley have 28 days to pay back this money.

The scheme was established in May 2013, listing Black & White Financial Solutions as the provider. 

Both Stanley and Green were directors of the scheme’s sponsoring employer, BWFS — an unregulated introducer that is registered in Belize and whose job it was to create leads for Gladstone Associates Provident.

Free pension ‘reviews’

BWFS purchased details of potential clients and contacted them to offer a “review” of their pensions. If accepted, BWFS informed the clients of the BWFS Occupational Pension Scheme and provided them with an information pack that outlined a “cash rebate pension strategy”. 

The ombudsman said this indicated that members would receive commission payments from the investment companies, equal to 20 per cent of their pension, and a fixed return of 3.5 per cent a year.

The 15 per cent commission paid to BWFS as a result of these investments was not disclosed to the members. 

Ombudsman Anthony Arter concluded that “on the balance of probabilities”, both commissions were “taken from those members’ transferred funds”.

“Therefore, it appears that the 20 per cent rebates paid were unauthorised payments under section 160(2) of the Finance Act, and a form of pension liberation,” he said.

“In allowing these unauthorised payments to be made, Mr Green and Mr Stanley have committed maladministration.”

Between August 2013 and September 2014, an aggregate total of £858,679 was invested in the form of unsecured loans to, at the time, a recently set up property development company and an overseas company that listed foreign exchange and contracts for difference.

With no evidence the investments were diversified, the ombudsman concluded it was “more likely than not” that if either of the trustees had obtained investment advice, pension holders would have been advised against investing in the scheme.

Less than a month after the scheme was established, Stanley filed a bankruptcy petition and received a bankruptcy order. Green was later appointed as sole trustee in February 2014.

Despite being disqualified as a trustee, the ombudsman found that Stanley still had a “high level of involvement” after his disqualification. 

He named himself as trustee when registering the scheme in October 2013 with the Pensions Regulator, and when executing certain loan agreements.

Following the outcome of the investigation, the trustees can appeal to the High Court. Arter has sent a copy of the determination to TPR.

This article first appeared on FTAdviser.com