The Pensions Ombudsman has created a specialist team to investigate breaches of trust, and allegations of dishonest and fraudulent behaviour by pension scheme trustees.
The department, called the pensions dishonesty unit, was created following a string of high-profile determinations by the ombudsman, where there was evidence of breach of trust and misappropriation of funds.
These included cases involving Norton Motorcycles, Henry Davidson and the Grosvenor schemes, which together amounted to around £18m in misappropriated funds.
The unit’s aim is to hold wrongdoers to account and ensure they repay scheme members, although the TPO has not yet announced whether there will be a limit on how much should be paid back.
While its remit overlaps with that of the Pension Protection Fund’s Fraud Compensation Scheme, any money obtained by the pensions dishonesty unit will come directly from individuals who perpetrated the fraud. Whereas the Fraud Compensation Scheme raises its funds from a levy paid by all occupational pension schemes.
A pilot of the scheme is currently under way, with staff taken from the ombudsman’s casework and legal departments.
Pensions Ombudsman Anthony Arter said: “A noticeable trend in recent years has been the increase in cases relating to trustee dishonesty and wrongdoing, leading to substantial losses for individual pension scheme members. The Norton determination demonstrated a change of approach for us, which not only holds trustees personally liable but also has the potential to benefit all scheme members.
“The extension of this approach to other cases involving trustee dishonesty through the new pensions dishonesty unit pilot is very significant; enabling quicker redress and the recovery of funds that may otherwise not be achieved, directly from the guilty party.”
A slew of cases
The ombudsman has oral hearings scheduled in February and March relating to two pension schemes that could fall under the scope of the pensions dishonesty unit, and recently made two further determinations relating to the Grosvenor schemes, which it is following up with enforcement action in the courts.
The trustee of the Grosvenor scheme, R Kench, saw complaints brought against him from several members alleging that he had invested their money inappropriately, leading to a loss of members’ rights and benefits.
He and his brother incorporated Pension Assist, an unregulated introducer, and met with Stuart Stone, at that time an independent financial adviser, who proposed an investment arrangement under which the Grosvenor schemes would be established and would invest in Realsave, a finance company set up by Stone’s 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 that he had access to other investments that could cover any shortfall in returns.
Kench, in his capacity as trustee, did not investigate the validity of these claims, and the warehouse turned out to be empty.