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Pension scheme gets dressing down from regulator

Pension scheme gets dressing down from regulator

Controversial workplace pension scheme London Quantum has received a formal dressing down from The Pensions Regulator, after it was found to have exposed its members exclusively to risky, undiversified and highly illiquid assets.

In particular, the regulator issued a damning assessment of the scheme’s former trustee, Dorrixo Alliance, and its director Stephen Ward.

However, the regulator did not issue any penalties.

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The main purpose of the report was to formalise the transfer of the scheme to the trusteeship of Dalriada Trustees Limited.

The report revealed that between August 2014 and May 2015 the scheme had exposed its 91 members to nine unregulated, risky, highly illiquid investments, most of which were offshore.

They included car park spaces in Dubai and Glasgow, a Brazilian eucalyptus plantation, hotel rooms in a yet-to-be-constructed hotel in Cape Verde, and a handful of unrated corporate bond issuances.

The Pension Regulator’s decision to name Stephen Ward in the final notice demonstrated an extension of its powers, a spokesperson told FTAdviser.

Nicola Parish, director of case management at The Pensions Regulator, said she hoped the publication of the report would act as “a reminder to all savers, pension scheme trustees and administrators to remain alert to the dangers of transferring pension savings in order to access unrealistically high returns often associated with exotic sounding investment opportunities”.

When The Pensions Regulator appointed Dalriada as the scheme’s new trustee, it instructed it “to realise as many of the investments as soon as is expedient”.

However, Mike Crowe, a trustee representative at Dalriada, told FTAdviser that, given the illiquid and exotic nature of the investments, this was yet to happen.

“We are speaking to the investment providers now, but we can’t exit the investments without taking the appropriate advice,” he said.

He said all the members - most of whom had no connection to London Quantum, and were persuaded to join the scheme by cold-callers - remained in the fund.

He said none were currently drawing down on a pension, although a number were aged over 55.

“A lot of them are very, very concerened. They fear for the worst - that they’ve lost all their money.”

He said he was hopeful that much of the money could be recovered, but he said he had not “got to the stage where we can say yes or no”.

The Pension Regulator would not confirm whether it was investigating the matter further or rule out the possibility of doing so.

james.fernyhough@ft.com