Millions in Compensation To Be Paid By Trustees

Trustees have been ordered by the Pensions Ombudsman to pay £2.4 million compensation to its 14 members after they were found to have mis-managed their pension scheme.

The members approached the Pension Ombudsman complaining that the trustees had misrepresented the scheme and mismanaged the funds.  They had issued false benefit statements and due to this had lost funds that the members had originally put into the scheme.

The Henry Davison Ltd pension scheme started in May 2018 by the trustees Anthony Davison and Penny Davison and was set up as a money purchase occupational pension arrangement.

The trustees signed an asset management agreement with Tivan, a swiss based investment manager back on 29 March 2012. The trustees admit they did not seek any financial advice as Mr Davison thought he understood this type of investment and business model.

Pension funds of £1,328,963 managed by Tivan took a loss of £1,223,000.  The loss included charges of £1,100,000 to run the accounts, £260,000 in finance costs, Prime broker fees of £100,000 and £740,000 in commission to Tivan.  Then in 2016 Tivan went into liquidation.

Complaints made by the 14 members said “the trustees did not disclose the fee structure of the investment with Tivan”.

The scheme entered into loans to the total of £798,061 across 8 companies back in October 2015.  One of the members said, “they had not been aware that some of their assets had been invested in loans”.

A company owned by Mr Davison called Kirkpatrick Fiscal Ltd also received an investment of £173,461 in preference shares from the scheme.  Another company also owned by Mr Davison set up back in 1997 called Henry Davison Associates Ltd received £114,803 from the scheme assets showing on invoices as consultancy services to the trustees between 5 September 2010 and 20 December 2012.

The Pension Ombudsman ordered the trustees to pay into the scheme within 28 days the following:

• £1,328,963 the amount the trustees transferred into the Prime Brokers accounts in respect of the AMA with Tivan, less any funds that were returned to the scheme when the accounts were closed.
• £798,061 that was paid out by the trustees as loans.
• £173,461 that was invested in Kirkpatrick Fiscal Ltd
• £114,803 the amount of all payments made by the trustees to Henry Davison Associates.
• Plus, interest at 8% of the judgement amount
• £5,000 to each of the 14 scheme members as compensation for distress and inconvenience caused.

Comment

This case reinforces the importance of trustees taking independent professional advice and the personal liability that each trustee has if negligence is proved/ruled on.