Professional trustees charged with rescuing three pension schemes that flouted investment rules say selling out of prohibited assets may thwart their efforts to recoup more than £14m owed to members.
Dalriada Trustees was appointed by the Pensions Regulator to the schemes in June after a “clear conflict of interest” was found by the Pensions Ombudsman, since all three funds are invested solely in preference shares of Norton Motorcycle Holdings.
Stuart Garner is chief executive and the main shareholder of the motorcycle manufacturing company, and former trustee of the Dominator 2012 Pension Scheme, Commando 2012 Pension Scheme and Donington MC Pension Scheme.
According to an update sent to members yesterday, Dalriada says that supporting Norton in its fundraising activities “represents the best chance of the schemes recovering their investments in full and is in the best interests of the members”.
With an amount due to members in excess of £14m, “any attempt to extract funds now from the Norton business or, indeed Mr Garner personally, are not going to generate anything close to that figure,” the company stated.
The schemes’ investments
According to Dalriada, the funding in Norton Motorcycles was provided by way of the scheme assets being invested solely in preference shares. These are a form of debt where shareholders are entitled to a fixed return on their investment, and the shares themselves may be redeemed at par value (ie. the price that was paid for them).
The schemes’ shareholdings in Norton are due a 5 per cent yearly return. However, this is at the discretion of Norton, as is the ability to redeem the shares. Preference shareholders do not have voting rights (so are not directly able to influence the actions of the Norton business).
The trustee recognised, however, that there was a conflict of interest when the schemes were set up, since these are invested in a way that is not permitted under current regulations, alongside other governance failings.
“Dalriada understands that Mr Garner was mis-sold the idea of using pension schemes in this way," the update continued.
“He recognised his shortcomings and that he was not a professional trustee and he responded to TPR’s requests for information and, ultimately, supported the appointment of a professional, independent trustee.”
Case revealed by ombudsman
Sally Holmes, daughter of late scheme member Robert Dewar, is still waiting for a request to switch out of the Commando scheme, made by her father in February 2018 to come through, alongside redress payments ordered by the Pension Ombudsman.
Mr Dewar had transferred his £155,891 pension from the Halifax defined benefit scheme to the Commando scheme in 2012.
According to Ms Holmes, who took over her father’s finances due to his ill health in 2017, her father's transfer was carried out by Simon John Colfer, who later admitted to conning hundreds of people in a complex pension fraud and was given a suspended prison sentence in May 2018.
Colfer was found to have posed as a financial adviser promising savers they would receive a cash lump sum of up to 25 per cent of the transfer value if they transferred using his services. As a result of the transfer Mr Dewar had to pay a tax charge to HM Revenue & Customs of £14,000.
In his determination, Pensions Ombudsman Anthony Arter said his organisation had received "a number of complaints concerning the trustee’s failure to action members’ requests to withdraw their monies from the scheme, and from two other pension schemes of which Mr Garner is the sole trustee; the funds of which are also invested solely in Norton Motorcycle".
No redemptions before 2020
In its update to members, Dalriada detailed the plan agreed with Mr Garner, which will include a 50 per cent initial fundraise expected to happen before Christmas 2019.
There will be a second fundraise in 2020, with Norton pledging to include 5 per cent interest to be calculated at the date of redemption, alongside a further 2.5 per cent to be paid as an additional dividend.
With the plan running until the end of 2020, members will have to wait until then to receive any payments.
“Until such time as either the monies are repaid in full or Dalriada has some certainty that the monies will be repaid in full at some point in the future, it cannot consider making benefit payments,” the company stated.
Members hopeful of recovery
Ms Holmes, who continues waiting for a resolution to her father case, said she is “mindfully optimistic we will get some, if not all, of the money back”. However, Mr Dewar passed away in October.
We are mindfully optimistic we will get some if not all of the money back.
Sally Holmes, member relative
She said: “He will now never see this disaster resolved. I will keep fighting his corner nonetheless but I am devastated to have not been able to resolve this for him.”
Sean Browes, senior trustee representative at Dalriada, has been in contact with the scheme members.
He said: “I totally understand the members’ frustration in not having their benefits paid, all things being equal. But this is not a normal situation.”
He noted that in in the context of liberation schemes and pension scams, where members typically lose all, or at least a large part, of their pensions, “there is at least some hope of a positive outcome” in this case.
