The Pensions Regulator (TPR) has released its Regulatory Intervention Report on Friendly Pensions Limited. Notably this case marked the first use of an International Arrest Warrant by TPR.

This note provides an insight into the investigation and some of the key points to take away from it.

In a complex and urgent case, TPR demonstrated its commitment to protecting pension savers from fraud. This case involved swift and strategic action to recover stolen funds and prevent the fraudsters from re-entering the pensions market.

Case summary

Between 2012 and 2014, 245 members of legitimate pension schemes were persuaded to transfer £13.7 million into 11 fraudulent schemes controlled by Alan Barratt and Susan Dalton. The funds were either lost in unsuitable investments or spent on fees and expenses for the fraudsters’ benefit.

Concerns first arose in 2014 when TPR was alerted by directors of Friendly Pensions to potentially fraudulent activities.

As a result, TPR commenced investigations which found that Barratt and Dalton would contact pension savers through website adverts, texts, and cold calling, offering “tax free cash” rebates and higher returns on investments. These payments were unauthorized and put victims at risk of tax charges. 

Legitimate pension schemes often questioned the transfer requests, suspecting fraud. However, Barratt and Dalton misled victims with false claims, including fake employment contracts and template letters to push back on ceding schemes. Victims were falsely assured of the legitimacy of these payments and asked to keep them secret.

TPR’s response

TPR issues regulatory proceedings in 2014 and used its powers under the Pensions Act 1995 to secure the schemes and appoint an independent trustee (Dalriada Trustees Limited). In 2018, Barratt and Dalton were prohibited from acting as trustees under section 3(1) of the act, deeming them unfit for the role.

In 2016, TPR pursued a restitution claim in the High Court under section 16 of the Pensions Act 2004, resulting in Barratt and Dalton being held liable for the misappropriated funds. However, much of the money had already been spent, making it difficult to recover.

Following a thorough investigation, TPR also initiated criminal proceedings. Barratt and Dalton were arrested and sentenced to prison terms, and their assets were confiscated to compensate the schemes.

Outcome for members

In January 2024, members were notified of initial compensation payments totalling £13.2 million from the Fraud Compensation Fund, successfully claimed by Dalriada Trustees Limited. The final compensation due to the schemes is yet to be determined.

Key takeaways

1. These swift and extensive investigations demonstrate TPR’s evolving approach to tackling pension scams. This case marked the first use of an International Arrest Warrant by TPR which showcases that they remain committed to using all available powers and working with various international bodies to protect savers and bring fraudsters to justice.

2. Whistleblowers were instrumental in this case. TPR encourages trustees, advisers and savers with concerns about pension schemes to report them to Action Fraud and TPR. Additionally, schemes are urged to join over 700 other schemes which have already made the Pledge to Combat Pension Scams.

3. Trustees need to remain vigilant to fraud and the various tactics employed to achieve it.

Given the importance of reporting on fraudulent activity and TPR's policing of it, trustees may wish to seek advice on this point. Burges Salmon can assist in advising on all aspects of pensions scams and ensure any transfers are legitimate and complaint with legislation. If you would like to discuss this topic further, please contact your usual Burges Salmon pensions contact or our regulatory pensions expert, Clive Pugh.

This article was co-authored by Fraser Campbell and Clive Pugh.