​​Optimum Retirement Benefit Plan (CAS-80110-K1M0)

Ombudsman’s Determination

Outcome

Having fully considered the evidence and submissions presented in writing, and those provided at the Oral Hearing, I uphold the complaints. In summary: 

I have found that the Trustees have committed various breaches of trust by: 

1. failing to take steps to manage the various conflicts of interest that existed, in breach of section 249A of the Pensions Act 2004 (the 2004 Act), and Clause 5.1 of the Trust Deed (Section D.2 below); and 
2. failing to act in accordance with the investment requirements and duties imposed on them by Part 1 of the Pensions Act 1995, the Investment Regulations and case law2 (Section D.3 below). 

In addition, I have found that Mr Craig has committed the following breaches of trust: 

1. committing a fraud on the power of investment (Section D.3.8 below); 
2. paying Scheme funds to companies outside the scope of his powers under the Trust Deed (Section D.4.1 below ); 
3. making payments out of the Scheme’s funds to himself outside the scope of his power to do so under Clause 20 of the Trust Deed (Section D.4.2.1 below); 
4. acting outside the scope of his powers under the Trust Deed in making payments to three individuals, namely Mr Dowd, Mr Jenkins and Mr Ewing and/or by failing to exercise due skill and care in employing those individuals (Section D.4.2.2 below); 
5. acting outside the scope of his powers under the Trust Deed in using Introducers3 and paying them fees far in excess of the market rate (Section D.4.3 below); 
6. acting outside the scope of his powers under the Trust Deed in making or arranging loans to the Scheme’s members (Section D.4.4 below); 
7. applying the balance of the Scheme’s fund other than in a legitimate manner and/or without fulfilling his equitable duty to act with due care and skill (Section D.5 below); and 
8. failing to comply with the requirements of the 2004 Act, section 249A, (Sections D.6 and D.7 below). 

I have found that Mr Kelly and Mr Reilly have acted in breach of trust by: 

1. charging and accepting fees for their services as Trustees at a rate that was excessive and unreasonable (Section D.4.3.1 below); and 
2. breaching their duty under Clause 5 of the Scheme’s Trust Deed by failing to report matters to TPR promptly, or even to investigate whether they had a duty to do so, as soon as reasonably practicable after becoming aware of certain investments made and issues that existed in relation to the Scheme. This also amounted to a breach, by Mr Reilly and Mr Kelly, of their equitable duty of care (Section D.8 below). 
3. I have also found that there has been maladministration on the part of the Trustees, by failing to have due regard for: TPR’s Code of Practice No.13 (the 2013 Code), published in November 2013, entitled ‘Governance and administration of occupational defined contributions trust-based pension schemes’; and TPR’s Code of practice no: 13: ‘Governance and administration of occupational trust-based schemes providing money purchase benefits’ (Sections D.2, D.4, D.6 and D.8 below). 

Complaint summary

Dalriada has referred the following matters of dispute, which Mr E has joined within his complaint: 

1. the Trustees failed in their duties to the Scheme, including (but not exhaustively) failing to comply with statutory requirements, guidance from The Pensions Regulator (TPR) and governance requirements; 

2. the Trustees did not adequately inform members of the Scheme of the nature, suitability and performance of the underlying investments, nor provide an adequate indication of the value and security of their benefits; 

3. the Trustees failed to obtain independent investment advice and/or undertake sufficient due diligence with regard to the investments made on behalf of the members and the Scheme; 

4. the Trustees invested the members’ funds in high-risk, unregulated, illiquid investments/assets that were inappropriate and did not comply with the regulations governing pension scheme investments, which ultimately resulted in material losses of members’ funds as a result of the failure of said investments; 

5. the Trustees breached the investment duties imposed on trustees under Part 1 of the Pensions Act 1995; 

6. while a Statement of Investment Principles was produced for the Scheme, the evidence indicates that neither the requirements of that statement, nor indeed the investment strategy and principles outlined therein, were followed or implemented at all by the Trustees; 

7. the Trustees failed to act upon requests from members in respect of their benefits in a timely fashion; 

8. the Trustees failed to maintain adequate records in relation to the investments made on behalf of the members; 

9. the Trustees allowed and facilitated the payment to numerous “Introducers”1 of substantial sums from Scheme funds, for referring new members to the Scheme; 

10. Mr Gordon Craig personally profited from his position as trustee to the Scheme; 

11. the Trustees facilitated and/or allowed pension liberation in the Scheme; and 

12. the Trustees failed to operate the necessary controls to ensure the effective and transparent administration of the Scheme. 

Mr E has also separately complained that: 

1. his requests to transfer out of the Scheme have been ignored; 

2. he believes that his pension benefits have been lost; and 

3. he has joined Dalriada’s referral, as outlined in paragraph 1 above.