When the Pensions Regulator launched its corporate plan in April of last year, I wasn’t the only person to be a little sceptical. “Intervening more frequently and acting quicker?” – the proof is in the pudding and the pudding had gone cold. That was then – this is now.
Actions are speaking louder than words
Last week this blog asked the Pensions Regulator’s CEO- Lesley Titcomb to intervene quickly to take down factory-gate adverts that were frightening people towards taking a cash sum from their Carillion pension – minutes after the announcement that the sponsor was bust. Within a couple of minutes, I had a personal response and by lunchtime the adverts had been taken down. I am impressed.
Friendly and the “not so Friendly” Pensions
For the past couple of years, I have been following the sad case of Friendly Pensions Limited.
The name may be familiar if you were involved in workplace pension selection in 2013 and 2014. A master trust of the same name pioneered many of the techniques which are best practice today. Unfortunately, it was inextricably embroiled with another (not so) “Friendly Pensions”.
Despite an attempt to re launch as “GenLife”, the proper Friendly Pensions never recovered and was taken over by Smart Pensions, who look after its employers and members to this day (and for many years to come). That story had a happy ending, but the story of the Spanish Friendly pensions continues.
As far back as October 2015, the ambulance chasers were out for the victims of this Friendly scam. But the matter was properly in the hands of the Pensions Regulator, which is why this blog has been silent.
Yesterday, in a break from the past. The Pensions Regulator published the full story of the Spanish Friendly Pensions – together with case studies of how people were sucked into it. I re-publish the Pensions Regulator’s press-release.
Anyone who has dealt with tPR in the past, read this – and think again. Anyone tempted by ads like the one at the top of this blog – resist.
If you are in any doubt about what you are doing , speak to the Pensions Advisory Service , by following that link or by calling 0300 123 1047.
Pension scammers ordered to repay £13.7m they took from victims
Four people who ran a series of scam pension schemes have been ordered to pay back £13.7 million they took from their victims.
David Austin, Susan Dalton, Alan Barratt and Julian Hanson squandered the money after 245 members of the public were persuaded via cold-calling and similar techniques to transfer their pension savings into one of 11 scam schemes operated by Friendly Pensions Limited (FPL).
Victims were told that if they transferred their pension pots to the schemes they would receive a tax-free payment commonly described as a “commission rebate” from investments made by the pension scheme – a form of pension scam.
Today (23 January) the High Court ruled that Austin, Dalton, Barratt and Hanson should repay millions of pounds they took from the schemes over a two-year period.
The Pensions Regulator (TPR) had asked the High Court to order the defendants to repay the funds they dishonestly misused or misappropriated from the pension schemes – the first time such an order has been obtained.
Austin laundered funds from the schemes into his bank account and the accounts of family members in the UK, Switzerland and Andorra through a number of businesses that he had set up in the UK, Cyprus and the Caribbean, including FPL. TPR showed the High Court evidence of how members of Austin’s family had lived a life of luxury using the money – including showing off their spending on expensive goods, ski holidays and trips to Dubai and the Mediterranean on social media sites.
Dalriada, the independent trustee appointed by TPR to take over the running of the schemes, will now be able to seek the confiscation of the scammers’ assets for the benefit of their victims.
Nicola Parish, TPR’s Executive Director of Frontline Regulation, said: “The defendants siphoned off millions of pounds from the schemes on what they falsely claimed were fees and commissions.
“While Austin was the mastermind, they all took part in stripping the schemes almost bare. This left hardly anything behind from the savings their victims had set aside over decades of work to pay for their retirements.
“The High Court’s ruling means that Dalriada can now go after the assets and investments of those involved to try to recover at least some of the money that these corrupt people took. This case sends a clear message that we will take tough action against pension scammers.”
In his judgment, Judge Mark Pelling ruled that Austin had been the “mastermind” behind the scam and that all four of the defendants had acted dishonestly.
He ruled that Mr Austin and Mr Barratt were jointly and severally liable to pay £7,713,317.71 plus interest, that Mr Austin and Ms Dalton were jointly and severally liable for £5,900,947 plus interest and that Mr Austin and Mr Hanson were jointly and severally liable to pay £122,937.37 plus interest. The judge also ordered that they pay the costs of TPR and Dalriada on an indemnity basis.
How the scam worked
- Between November 2012 and September 2014, 245 victims were cold-called or lured by a series of scam websites and persuaded to transfer their pension funds into one of 11 scam schemes. The victims were told their pensions would be reinvested and they would be paid an upfront cash lump sum for making the transfer. They were also lied to that their funds would be put into assets, bonds and HMRC-compliant investments to meet the target return of 5% growth a year.
- False documents were used to trick staff at the ceding schemes – the schemes where the victims had their pensions – into believing that the pension holders worked for companies linked to the scam schemes. This meant the staff were persuaded to allow £13.7 million of funds to be transferred to the scam schemes.
- David Austin installed Alan Barratt, Susan Dalton and Julian Hanson as the trustees for the scam schemes and they were then paid to act on his instructions, allowing the scheme monies to be used at Austin’s will. Mr Barratt and Mr Dalton also acted as salesmen for Mr Austin’s Spain-based business, Select Pension Investments, persuading victims to transfer their pension pots into the schemes. A small proportion of the funds – between 10% and 25% of the amounts transferred – were given back to the victims as their “rebate”, although many victims were assured that this payment was coming from the investment provider not out of their pension pots. More than £1 million was paid to “introducers” or “agents” who used cold-calling to encourage pension members to transfer over their funds.
- More than £10.3 million was transferred to businesses owned or controlled by Mr Austin, including the current accounts of Friendly Pensions Limited and Friendly Investments Company Ltd. Mr Austin, a former bankrupt who had no experience of running an investment company, even used the bank accounts of his dead father-in-law and his elderly mother-in-law to move around hundreds of thousands of pounds. Mr Barratt was paid £382,208, Ms Dalton more than £168,000 and Mr Hanson £7,000. Mr Hanson’s scheme had become active only weeks before the scam was stopped. The High Court found that on the available evidence, Mr Austin and his family had derived at least £1.355 million of benefit from the scam.
- Just £3.2 million of the funds was invested. Among the investments were £2 million in an off-plan hotel development in St Lucia called Freedom Bay and an unregulated commercial property bond. £120,000 went to a company registered to Mr Austin’s daughter, Camilla Austin, to fund her father’s legal costs in a separate case.
- A whistleblower contacted TPR about the scam in November 2014. TPR then appointed Dalriada as an Independent Trustee to take over the running of the schemes from Mr Barratt, Ms Dalton and Mr Hanson, to prevent further funds from being taken out of the schemes by the scammers.
Names have been changed to protect the victims’ identities.
Case study 1: The refusal of one man’s pension provider to agree to a transfer saved him from losing more than £50,000 to the scam
Donald, 57, was cold-called by Susan Dalton in February 2013 and told that if he transferred his pensions from two companies to her scheme he would get a guaranteed return of at least 5% a year, plus a 10% cash lump sum upfront.
But while one of his pension providers agreed to the transfer of his £17,000 pot, the other refused to transfer his £58,000 pot. Instead, ReAssure rejected a series of letters from companies linked to the scammers, saying it was not satisfied that the receiving scheme was a valid one. Eventually, the scammers gave up trying to persuade ReAssure to make the transfer.
When he reached 55 in 2015, Donald contacted Susan Dalton to ask to draw down 25% of his pension. But she claimed he had never transferred his pension and then ignored his calls and emails – prompting Donald to call Action Fraud.
Donald, from Hull, said: “If ReAssure had allowed my pension to be transferred it would have been a disaster. I would have lost everything. I have had a very lucky escape.
“My wife and I were council tenants so Susan Dalton should have realised that we did not have lots of money and that our pensions were an important source of income to us. She totally misled me into transferring my pension and paid no regard for my financial well-being.
“She told me what I wanted to hear and I believed it. Looking back now, everything was basically a lie or a betrayal. I was naive. I was conned by a professional con merchant.”
Case study 2: A man who had given up work to care for his seriously ill partner and their three children had almost £50,000 taken from his pension pot by the scammers
Colin, from South Wales, had become the full-time carer for his partner when he was approached via text message.
He was offered up to 10% of his pension as a cash lump sum which the agent promised would not come out of Colin’s fund. Instead he was told his pot would be invested in the construction of holiday complexes in St Lucia with good returns. He was tempted by the opportunity to spend some money on his children, redecorate their home and potentially go on holiday with the lump sum.
After hearing about pension scams in 2014, Colin tried to approach the scammers but could not get in touch with them. Dalriada, the Independent Trustee appointed by TPR, later broke the news to him that he had fallen victim to a scam.
Colin, 48, said: “I should have known that it was too good to be true. I should have sought advice and asked more questions, but I didn’t.
“I had contributed towards my £50,000 pension pot, for which I had worked really hard, and now that has been taken from me.
“The loss of my pension will have a massive impact on my life. When my children finish school I will be around retirement age. There will be no money to draw down when I turn 55 and no pension savings for later life.
“I was greedy. I feel stupid for throwing away my financial future for £4,200.”
Case study 3: A couple lost both of their pensions after falling into the clutches of Alan Barratt
John and Samantha, from Hereford, were persuaded in 2013 that if they transferred their funds to Barratt’s pension scheme they would get better returns on their investments.
Their pension provider warned them that they believed the transfer could be pension liberation fraud, but Barratt convinced them to carry on, saying they would get a lump sum as commission for transferring their funds.
The couple then transferred a total of more than £78,000 – receiving £11,800 as their “commission”. But while they had been assured the funds would be invested in low-risk investments, they were sent details of a truffle trees firm in the West Country.
The couple were so concerned they contacted police. HMRC later contacted the couple to tell them the “commission” had come out of their pension – and handed them a tax bill of thousands of pounds.
John, 46, said: “As a result of my dealings with Alan Barratt my final salary pension is in a scheme that I don’t understand the status of but which I have been told is a scam.
“As far as I know, the majority of my pension fund is invested in truffle trees but I doubt whether that is legitimate. My partner appears to have lost her pension too.
“I deeply regret ever listening to Mr Barratt.”
- Section 16 of the Pensions Act 2004 allows TPR to apply to the High Court for a restitution order, requiring those who have been involved in the misuse and misappropriation of pension scheme assets (whether dishonestly or otherwise) to compensate the schemes for the losses suffered.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).