Investments  

Trustees’ mismanagement resulted in loss of funds

Trustees’ mismanagement resulted in loss of funds

Trustees have been ordered to pay £2.4m in lost funds into a pension scheme, as well as compensation to its members, after the Pensions Ombudsman found funds were mismanaged 

A complaint was made to the Pensions Ombudsman by 14 scheme members that the trustees had misrepresented the scheme, mismanaged the funds, issued fabricated benefit statements and due to this the funds which the applicants had put into the scheme had been lost.

According to the Pensions Ombudsman’s determination, the Henry Davison Ltd pension scheme was set up in May 2008 as a money purchase occupational pension arrangement, with Anthony Davison and Penny Davison as trustees.

On March 29, 2012, the trustees signed an asset management agreement with Tivan, a Swiss based investment manager, but the trustees admitted they had not sought any independent advice because Mr Davison believed he knew and understood the investment and business model.

The £1,328,963 of pension funds which were managed by Tivan occurred a loss of £1,223,000. This loss included charges to run the accounts with a total value of £1,100,000 as well as £260,000 in finance costs, £100,000 in prime broker fees and £740,000 in commission to Tivan. In 2016, Tivan then went into liquidation. 

The applicants complained that the trustees failed to disclose the fee structure of the investment with Tivan.

In October 2015, the scheme then entered loans totalling £798,061 split across eight companies. But one of the scheme members said that he had not been aware that some of the scheme’s assets had been invested in loans.

The scheme had also invested £173,461 in preference shares in Kirkpatrick Fiscal Ltd, which was owned by Mr Davison. 

Mr Davison also set up a company in 1997 called Henry Davison Associates Ltd and invoices sent to the trustees showed that this company was paid a total of £114,803 from scheme assets between September 5, 2010 and December 20, 2012.

The invoices stated that the payments to Henry Davison Associates were made in respect of consultancy services to the trustees.

The trustees were ordered by the Pensions Ombudsman to pay into the scheme within 28 days of the determination the sum of:

  • £1,328,963 that the trustees transferred into the Prime Brokers’ accounts in respect of the AMA with Tivan, less any funds that were returned to the scheme when the accounts were closed;
  • £798,061 that were paid out by the trustees as loans;
  • £173,461 being the amount invested in Kirkpatrick Fiscal Ltd; and 
  • £114,803 being the total amount of all payments made by the trustees to Henry Davison Associates.

Plus interest at the rate of 8 per cent of the judgment amount and £5,000 to each of the 14 applicants as compensation for the level of distress and inconvenience caused.

amy.austin@ft.com