Scammers beware, we are aware!
July is scams awareness month and the Citizens Advice Bureau is leading the charge.
The Pensions Regulator is not far behind with its promotional campaign.
The scorpion is never far away. It’s very much up to us as pensions people to help promote the message and I support both CAB and tPR who are doing a great job.
Occupational means occupational
As part of their awareness campaign, tPR have issues a case study of a scam they’ve been monitoring for some time. In February they issued a final notice of its determination to sack Dorrixo Alliance from its role as Trustee of the Quantum Investment Occupational Pension Scheme (QIMS).
I won’t go into the gory details- you can read the Final Notice here if you want to see the mechanics of a scam.
But there is a learning here for the DWP, who are currently looking at the Regulations surrounding Master Trusts, for QIMS was no ordinary company pension scheme.
QIMS was set up in April 2012, it has an HMRC certificate and is an occupational pension.
The original trustee of the scheme, worked for Quantum but were replaced before things got going by Dorrixo. The link with the company was broken.
Lesson one – break the link with the company and an occupational scheme is anything but!
Dorrixo was a front for a well-known face called Stephen Ward , though he appears to be hiding behind his accomplice Anthony Salih. They hid behind the corporate trustee.
Lesson two for the DWP – Corporate trustees are not transparent and are the root of much bad governance – they need to be properly regulated.
The original purpose of the scheme seems to have been as a tax shelter for some dealings in the shares of a Celebrity Greetings Business but this lasted only a couple of years. From around April 2014, QIMS was opened to new members who weren’t anything to do with Quantum as a company. Though only 96 members had invested , the Regulator found a further 609 transfer files for people who had been promoted the plan.
The promoters were a range of unregulated advisers including Quantum Wealth Management Solutions , Friendly Investments , the Resort Group PLC and other firms with a decidedly Costa del Sol sound to them. The introducers would receive commission based upon the combination of investments chosen by the investor. These commissions were paid “by deduction from the pension transfer funds received by the new scheme”,
Lesson three for the DWP – until commission is banned from the sales process, sales agents will continue to operate outside the jurisdiction of the FCA using occupational pension schemes as a front.
The three lessons I think the DWP can draw from QIMS are
- Occupational pension schemes are for people working for the companies that adhere to the trust; they should (other than NEST*) not be for private individuals to join.
- Corporate Trustees are good and bad – and when they are bad – they can be awful. They need to be properly regulated and their Directors be fit and proper under FCA rules
- The incentives for building up an occupational scheme should be clear. They should not include commissions. Sales should be rewarded by fees which should be clearly stated, where people are rewarded from within the fund, those services should be explicitly listed and the quantum of the reward made available for inspection.
* NEST allows private individuals to save for their retirement if they are self-employed.
The thin end of the wedge
In as much as QIMS is open to all, it must be defined as a master trust. As I have told the DWP, master trusts are not just for auto-enrolment, they can be used legitimately to pay people their pensions or illegitimately to rob people of their pensions.
QIMS looks like an example of the latter type but it is no different in high-level strategy than the plans set up by a number of consultancies for the benefit of members of the occupational plans that don’t offer pension freedoms.
The thin end of the wedge, that allows non-connected employees to join someone else’s occupational pension becomes the thick end of the wedge with QIMS.
If the DWP are serious about stopping this abuse they should accredit occupational schemes with the capacity to take transfers in. Otherwise, contributions should only be acceptable from employers participating in and adhering to the trust deed.
Occupational means Occupational!