The Pensions Ombudsman has upheld a complaint against the trustee of a small pension scheme for multiple breaches of trust and instances of malpractice, while demanding they reimburse the scheme to the tune of hundreds of thousands of pounds.
A complaint was brought against R Kench, trustee of the Grosvenor National Ltd Retirement Benefits Scheme, by Ms T and two additional applicants, who alleged the trustee had invested the scheme’s funds inappropriately leading to the loss of members’ rights and benefits.
A total of £615,000 was transferred into the scheme by its seven members but it is unclear whether that money still exists.
The case began in 2011 when Kench’s brother, D Kench, incorporated Pension Assist, an unregulated introducer.
Kench was employed by Pension Assist from that time onwards, and introduced his brother to independent financial adviser Stuart Stone, although D Kench could not recall exactly when or how they had met.
Stone proposed an investment arrangement, which involved the establishment of a pension scheme that would invest in a finance company, Realsave, set up by his wife.
Stone said Realsave would provide short-term finance to businesses that could not otherwise get credit, while holding goods in a warehouse as security. He said he had access to other investments that could cover any shortfall in returns.
Kench, in his capacity as trustee of the Grosvenor scheme, did not investigate the validity of these claims or carry out due diligence. The warehouse later proved to be empty.
Though Realsave had no annual returns or accounts, had received no existing investments, had lent no money, and had no contracts in place with banks, D Kench told the PO hearing that he and his brother had viewed the investment as a “game-changing opportunity to make a great deal of lolly”.
Grosvenor National Limited was established in 2012 by Kench so it could be the scheme’s sponsoring employer, and he served as the scheme’s trustee.
Despite this, D Kench testified at the hearing that he had been unaware of the statutory duties imposed on scheme trustees, nor aware of the Pensions Regulator’s website or the guidance available there, and had taken no steps to educate himself on the role, nor seen any reason to do so.
Ms T, the principal applicant, joined the scheme in 2012 having been dissatisfied with the performance of her existing scheme.
She believed it important to seek advice from a regulated provider, and believed Pension Assist was such an entity.
In 2013, the total value of her previous company pension, £175,605, was transferred into the Grosvenor scheme.
Scheme amasses £615k
The scheme grew to have seven members who transferred a total of £615,000 into it.
Half of each member’s pension was invested in Realsave, 30 per cent was taken by Pension Assist as a commission, and the remainder was paid to the member as a “fee”.
Members were not made aware of this arrangement, however.
Following the investment in Realsave, Stone stopped speaking to the Kench brothers and sent no further documentation. He was arrested in 2014 and charged with fraud in relation to a separate investment.