UK Pensions Regulator Bans Three Trustees

8 February 2012 (PLANSPONSOREurope.com) – Three people have been prohibited from acting as trustees following the UK’s The Pensions Regulator’s investigation into the Hugh Mackay Retirement Benefits Scheme. 

The regulator's Determinations Panel has today published its full reasons for prohibiting Robert Angus Hill, Nicholas John Halton, and Simon Christopher Ragg.

The trio, who resigned from the scheme in October 2011, admitted breaching investment regulations and legislation requiring them to demonstrate sufficient trustee knowledge and understanding. The panel ruled the breaches were so "serious and persistent" that the three former trustees should be prohibited from acting as trustees of trust schemes in general on grounds that they were not ‘fit and proper’ persons.

The regulator’s chief executive Bill Galvin said: “Fortunately, incidences of this kind are rare. The vast majority of pension trustees take a very different approach to discharging their duties. Educating and supporting trustees is at the heart of what we do, but we’re ready to intervene directly where pension savings are placed at risk.

“Our investigation in this case unearthed some of the most worrying examples of mismanagement of a final salary pension scheme that we've seen. Typically the sponsoring employer supports the pension scheme - here the scheme provided the company's main source of income.

"The risk to members' benefits posed by the investment strategy and borrowings secured against scheme assets was stark; and it is difficult to imagine a more clear-cut conflict of interest than a trustee effectively negotiating with himself as the vendor in a property deal. The scheme’s finances are in a serious state and the Pension Protection Fund will be required to step in to pay compensation to members.”

The regulator’s investigation revealed that:

• In breach of investment regulations, the vast majority of the scheme’s assets had been invested directly in property or property-related investments, including commercial property stated to be worth more than £35m in the scheme’s accounts. Furthermore, the scheme's accounts showed it was committed to repay bank loans of more than £21m secured on the property assets financed by such borrowings.
• The Scheme paid Chartpoint Limited (‘Chartpoint’) - also its sponsoring employer - for certain services. More than £1.1m was paid between 2006 and 2009, according to the scheme accounts. All three trustees benefited through salaries and bonuses from the company.
• The trustees’ relationship with Chartpoint gave rise to serious conflicts of interest, which the panel found were not properly managed. In two speculative property deals examined by the regulator, the scheme bought land for £1.55m in 2006, and a commercial building for £8.6m in 2007. In both examples, one of the trustees had a substantial interest in the vendor companies and was also a trustee of the scheme purchasing the properties.
 

PLANSPONSOREurope Staff
editors@plansponsoreurope.com