Seven-year scam poses ‘serious questions’ for TPR

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Seven-year scam poses ‘serious questions’ for TPR

The Pensions Ombudsman has finally brought to a close a seven-year case that left members of three pension schemes looking to recoup losses in excess of £14m. 

However, questions have been raised about the effectiveness of the Pensions Regulator in this case.

The three schemes – the Dominator 2012 Pension Scheme, Commando 2012 Pension Scheme, and Donington MC Pension Scheme – were established by Stuart Garner in 2012 in his capacity as director of Manorcrest, which was the schemes’ principal employer. 

The ombudsman’s report noted that problems began early on, with the schemes promoted to prospective members as a means of investing in the marque Norton Motorcycles business, of which Mr Garner was the sole director and a shareholder.

The scheme's administration was initially undertaken by Peter Bradley and Andrew Meeson, directors of T12 Administration, whom Mr Garner had approached to set up and run the schemes.

They in turn introduced Mr Garner to Simon Colfer, sometimes known as Simon Davies, who undertook the promotion. In 2013, both Bradley and Meeson were jailed for pensions fraud in a separate case.

Consequently, as a Guardian/ITV News investigation in January showed, 228 scheme members had their entire pension pots invested in Norton companies illegally. The ombudsman’s report confirmed that at no point was investment advice taken by Mr Garner. 

T12 folded after the imprisonment of two of its directors, and a new company, LD Administration, was brought in to administer the three schemes.

Margaret Liddell, director of LD, “agreed to take on the role of administrator in relation to approximately 300 schemes” from T12, including the three set up by Mr Garner, the ombudsman noted.

Ms Liddell told the Pensions Ombudsman that she and her staff “had received no training before LD was appointed as scheme administrator… and had no experience administering occupational pension schemes”.

This shocking case raises serious questions about the effectiveness of the regulators involved and the protections we have for people who fall victim to pension scams.Labour MP Stephen Timms

According to the ombudsman’s report, Ms Liddell had viewed T12’s dissolution as “a business opportunity”.

After the deteriorating financial position of Norton became apparent, and in response to a number of complaints levelled by members in the years since the schemes were established, and after a previous investigation by the ombudsman revealed “a clear conflict of interest”, TPR appointed Dalriada Trustees to the schemes in June last year.

Dalriada took the decision in 2019 to support Norton in its bid to raise funds, telling scheme members that it “represents the best chance” of the schemes recovering their investments in full. 

“Any attempt to extract funds now from the Norton business or, indeed Mr Garner personally, are not going to generate anything close to that figure,” they said. 

Norton’s financial position continued to worsen, and it fell into administration in January this year.

Ombudsman finds several breaches

In his decision, ombudsman Anthony Arter said: “I have found a number of breaches by the trustee of his duties and maladministration on both [Mr Garner’s] and LD’s part.”

It was found that Mr Garner had “acted dishonestly and in breach of his duty of no conflict, his duty not to profit, and his duty to act with prudence had breached his investment duties”, as well as failing “to exercise due skill and care” with respect to investment functions, and that investment of members’ pension pots in Norton preference shares “amounted to a fraud on the power of investment”.

The ombudsman ordered Mr Garner to make restorative payments to all scheme members, calculated with interest, as well as an additional £180,000 to the original 30 applicants for “exceptional maladministration causing injustice”.

Dalriada Trustees said in a statement: “The situation with the Norton Motorcycle schemes rightly led to a number of complaints being made to the Pensions Ombudsman, in particular with regard to the actions of the previous trustee and administrators.

“Dalriada made its own complaint to the Pensions Ombudsman in the interests of all members of the schemes, and was also included as a respondent to the members’ complaints for the purposes of carrying out the [ombudsman’s] directions.

“Dalriada has now had sight of the Pensions Ombudsman’s final determination and will look to comply with those directions accordingly.”

TPR’s effectiveness questioned

Responding to the decision by the ombudsman to uphold the complaints, Labour MP Stephen Timms, chair of the Work and Pensions Committee, said: “This will be a welcome vindication for those who have lost out – but it has been a long time coming.

“Any further delay will be all the more painful for savers because concerns about this scheme were being raised as long ago as 2014, but somehow even those alarm bells were not enough to prevent this outcome.

“This shocking case raises serious questions about the effectiveness of the regulators involved and the protections we have for people who fall victim to pension scams."

Mr Timms has twice written to TPR on the subject of the Norton schemes, requesting that the regulator answer a number of questions.

In his first letter, dated March of this year, Mr Timms sought clarity as to when the regulator first became aware of Mr Garner’s conflict of interest, and why no action was taken in the seven years following the establishment of the three affected schemes.

Now, in light of the ombudsman’s decision, he has requested further answers, not least as to how many other small schemes find themselves in similar positions, how many conflicts of interest have been raised with TPR since 2013, and whether the regulator now intends to carry out a wide review of the arrangements of smaller schemes with the aim of reassuring savers.

In response, a TPR spokesperson said: “We note the letter from the Work and Pensions committee and will be responding in due course.

“Following an investigation, in May 2019 we appointed Dalriada as the independent trustee to three pension schemes associated with Norton Motorcycles, and that [Mr] Garner was the sole trustee of, to prevent other savers being disadvantaged by transferring to the schemes.

“Following the company’s administration, we continue to be in close discussions with Dalriada and the administrators to Norton.”

Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert