Pensions trustees calling themselves 'qualified financial advisers' have been ordered to pay back scheme members over £880,000 by the Pensions Ombudsman after it found evidence of “multiple breaches of trust and many acts of maladministration”.
The trustees, Paul Green and Michael Stanley, set up BWFS Occupational Pension Scheme in May 2013.
Over the next year, they told scheme members they were "qualified financial advisers" and had "carefully selected the investment vehicles for their safety and assurance". They also promised a fixed return of 3.5 per cent per annum.
It is unclear whether or not the trustees were ever regulated by the Financial Conduct Authority.
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 Pensions Ombudsman has decided to uphold the applicants’ complaints which involved redress of more than £850,000.
It found Green and Stanley failed to obtain written investment advice before transferring people’s money into non-diversified, unsecured loan agreements, and that they provided scheme members with “false information”, and profiting from their position as trustees.
In an outcome published last week (October 13), the ombudsman ordered the trustees to pay £825,000 into the scheme, which represents the total in loan amounts, as well as to pay back just under £33,5000 which was 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 over £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 (BWFS) as the provider.
Both Stanley and Green were directors of the scheme’s sponsoring employer, BWFS - an unregulated introducer whose job it was to create leads for Gladstone Associates Provident - a company registered in Belize.
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 which 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.
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 had either of the trustees obtained investment advice, pension holders would have been advised against investing in the scheme.