Pensions regulator bans three trustees over investment breaches

The Pensions Regulator (TPR) has banned three trustees for ‘serious and persistent’ regulatory breaches, following an investigation into the Hugh Mackay Retirement Benefits Scheme.

Robert Angus Hill, Nicholas John Halton, and Simon Christopher Ragg, appeared before TPR’s determinations panel after resigning form the scheme in October last year.

The regulator said the trustees had breached investment regulations and criticised the valuation process employed. It said the trustees had created a conflict of interest by receiving payments or having a commercial interest in companies the pensions scheme was investing in.

TPR said the scheme’s finances were now so bad it would fall on to the Pension Protection Fund.

The panel found:

• 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 £35 million.
• The scheme's accounts showed it was committed to repaying bank loans of more than £21 million secured on the property assets financed by such borrowings.
• The scheme paid Chartpoint, also its sponsoring employe, for certain services. More than £1.1 million was paid between 2006 and 2009, according to the scheme accounts. All three trustees benefited through salaries and bonuses from the company.

TPR said 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 the scheme bought land for £1.55 million in 2006, and a commercial building for £8.6 million 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.

TPR chief executive Bill Galvin (pictured) said the trustee’s actions had left the scheme’s finances in a ‘dire state’.

‘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.’