The Pensions Ombudsman (TPO) has been demonstrating its disciplinary muscle in the last few weeks. It has ordered payments in the millions of pounds in two separate pensions liberation cases.

Pensions scamming has been a huge issue for the pensions industry for many years now and it has collectively being working hard to stamp out the use of pension schemes by unscrupulous individuals to scam hard working members of the public out of their lifetime savings.

It is therefore reassuring to see that TPO is using its powers and that TPO’s specially formed Pensions Dishonesty Unit (PDU) is fulfilling its very important purpose. And TPO has been unequivocal in its intention to keep using the PDU to continue to pursue these pensions liberation cases in the ongoing battle against pensions scamming.  

Uniway Systems and Genwick schemes – former trustee director fined nearly £10million

The first significant ruling was in relation to an investigation by the PDU into a trustee firm which resulted in an order for a former trustee director of the firm to repay in total £9.7million into the above two pension schemes. They were also ordered to pay additional amounts to the Applicants in recognition of the exceptional distress and inconvenience each had suffered. 

This was on the basis that the investigation found that the firm, and the individual in question, had failed to invest the scheme’s funds for a “proper purpose” (which of course is the key fiduciary duty of every pension scheme trustee) and instead had been “channelling money” into high-risk overseas investments.

TPO’s determination notes that “The Applicants and Respondents have been notified of the Determination, which is final and binding, subject to appeal to the High Court on a point of law. Information obtained during the investigation has been passed on to The Pensions Regulator (TPR) and the Fraud Compensation Fund”.

The determination emphasises the importance of pension schemes members being cautious with transferring their pensions and being alive to the risks of pensions scamming and unscrupulous individuals. 

Trustees facilitating pensions liberation made to pay £5.2million 

The second significant pensions liberation determination from TPO related to an investigation by PDU into three occupational pensions scheme, a pension administration company and the appointed trustees of the scheme. The outcome of these detailed investigations were multiple directions being issued to the trustees, ordering that they repay in total over £5million into the schemes. They were also ordered to pay additional mounts to certain of the Applicants in recognition of the exceptional distress and inconvenience each had suffered.

More than 100 people took transfers from their existing pension arrangements into the liberation schemes, many having chosen to transfer on the basis of promises that had been made to them about being able to take payments out immediately, even though they had not reached minimum pension age. 

Members then raised a complaint with TPO after becoming concerned about a lack of information around the schemes’ investment performance, and an inability to take benefits from the Schemes or transfer their funds.

The Deputy Ombudsman (DPO) found breaches of trust and failings on a number of separate and fundamental grounds.

Firstly, the schemes’ funds had been invested in breach of the investment duties that all trustees own to their pension scheme. This was on the basis that the investments were made for the purpose of pensions liberation and by trustees who were conflicted through their personal interest in many of the investments. 

As a result of this personal interest, it was also found that two of the trustees had acted dishonestly and as such had attracted personal liability. Additionally, the administrator of the schemes was found liable on the grounds of assisting the trustees’ dishonesty in respect of one of the breaches of trust.

There were also a number of governance failings as well which might be expected given the above.

Overall, the DPO held that the investments held by the trustees were high risk, undiversified and were not made in the best financial interests of the members.

This determination in particular is a good reminder of all of the key fiduciary duties that trustees owe to their pension scheme and its members and the severe consequences where those are breached to the detriment of scheme members. 

Comment

It is encouraging to see that the PDU is being effective in responding to pensions liberation and scammers. TPO is sending a clear message that such behaviour will not be tolerated, it will be rigorously investigated and severe penalties imposed where dishonest behaviours are evidenced such as in these two extreme cases. 

Dominic Harris, TPO, in commenting on the second case above said: 

“This is another example of the important work of the Pensions Dishonesty Unit.

"Cases that the PDU investigate are complex and resource-intensive but, as well as the directions to repay schemes more than £40m in total, its work is also vital in raising people’s awareness of scams and holding those who act dishonestly accountable for their actions.”

Pensions scamming is clearly still a serious problem faced by the pensions industry. 

TPO mentions in its summary of the first determination above that “Action Fraud reports that at least £17.7million was lost in 2023 to pensions fraudsters and highlights pension scams can happen to anyone”. That is quite a sobering statistic and anyone that has been subject to a pension scam will know the life-changing consequences it can have, with plans for retirement being pulled from under your feet.

Recent high-profile adverts backed by The Pensions Regulator (and an Eastenders storyline!) have tried to bring the risks of pensions liberation to the attention of the public to put them on alert of falling foul of dishonest actors. However, it remains to be seen whether that will have the desired effect on putting members of the public sufficiently on their guard in relation to any attempted scamming.

How we can help 

Our regulatory and transactions pensions lawyers have first in class experience advising on pensions regulatory matters of all sizes, and for both defined benefit and defined contribution schemes. Our team supports clients through investigations, ensuring compliance while managing risk, and are well placed to advising on approaches to member transfer requests, dealing with third party transfer firms and responding once liberation is suspected 

If you would like to discuss any aspect of this article please contact our Pensions Partners, Clive Pugh or Chris Brown. 

This article was co-written by Mairi Carlin and Chris Brown.