Who said pensions were as safe as houses?
http://www.thetimes.co.uk/tto/busine...cle3314003.ece
http://www.thetimes.co.uk/tto/busine...cle3314003.ece
Pension experts were appalled last night when it was disclosed that a company pension fund had been effectively hijacked by its trustees, who sold its conventional assets, geared up the proceeds with bank debt and bet almost the whole lot on speculative property developments.
At the same time, they siphoned off more than £1.1 million in salaries, bonuses and fees from the fund created from contributions of former employees of Hugh Mackay’s, a now defunct carpetmaking firm in Durham. At one point the fund had liabilities of £43 million and assets of £800,361.
One trustee was a part-owner of a semi-derelict car park in Newcastle, which he sold to the pension fund, exposing him to a blatant conflict of interest. The Pensions Regulator banned three men for life from acting as trustees and police are investigating. No arrests or charges have been made.
The remains of the fund are being absorbed by the industry lifeboat, so the 450 members will receive most — but not all — of their benefits.
Pension experts expressed amazement that funds were still vulnerable to such abuses, since stringent regulation had been introduced since the Robert Maxwell scandal two decades ago. Alex Waite, a partner with Lane Clark & Peacock, said, “I’m staggered that, despite 20 years of legislation, such affairs are still going on.”
The trustees — Robert Hill, Nicholas Halton and Simon Ragg — were directors or employees of Chartpoint Ltd, which became the scheme’s sponsor in February 2003. Mr Hill, a property developer, and his daughters were the owners of Chartpoint. Mr Ragg is described as a chartered accountant.
By 2009 the trustees had liquidiated most of the scheme’s conventional assets, borrowed £21.9 million and invested 87 per cent of the combined total in property assets. The scheme also paid £1.155 million to Chartpoint for services as well as salaries and bonuses to some of the trustees. Pension schemes are not allowed to place the bulk of their assets in illiquid investments such as property, nor can they borrow, except in extremely limited circumstances. While pension trustees can be paid, most are not and bonuses are unheard of.
The affair also raises questions about the scheme’s auditors and bankers, which the regulator named as the Newcastle accountant Leathers LLP and Allied Irish Bank. However, Michael Leather, a partner in Leathers, denied to The Times that his firm had ever been the scheme’s auditor.
Bill Galvin, chief executive of the regulator, said the three men, who resigned from the scheme last October, were not fit and proper to be pension trustees. Their breaches were “serious and persistent ... This case unearthed some of the most worrying examples of mismanagement of a final-salary pension scheme that we’ve seen.”
The regulation of occupational pension schemes has been radically overhauled since Robert Maxwell stole hundreds of millions of pounds from Mirror staff pension funds.
There are an estimated 100,000 pension trustees in Britain; only 13 have been banned since 2005.
• High pension charges and the wrong choice of annuity can cut pension income by a quarter, meaning they would have to work into their 70s to cover the loss, the National Association of Pension Funds warns today. It says that saving early, paying in more and working longer all help, but that charges and annuity rates are key. Those in schemes with higher charges would have to work three years longer to get the same pension as those on the optimum rate.
At the same time, they siphoned off more than £1.1 million in salaries, bonuses and fees from the fund created from contributions of former employees of Hugh Mackay’s, a now defunct carpetmaking firm in Durham. At one point the fund had liabilities of £43 million and assets of £800,361.
One trustee was a part-owner of a semi-derelict car park in Newcastle, which he sold to the pension fund, exposing him to a blatant conflict of interest. The Pensions Regulator banned three men for life from acting as trustees and police are investigating. No arrests or charges have been made.
The remains of the fund are being absorbed by the industry lifeboat, so the 450 members will receive most — but not all — of their benefits.
Pension experts expressed amazement that funds were still vulnerable to such abuses, since stringent regulation had been introduced since the Robert Maxwell scandal two decades ago. Alex Waite, a partner with Lane Clark & Peacock, said, “I’m staggered that, despite 20 years of legislation, such affairs are still going on.”
The trustees — Robert Hill, Nicholas Halton and Simon Ragg — were directors or employees of Chartpoint Ltd, which became the scheme’s sponsor in February 2003. Mr Hill, a property developer, and his daughters were the owners of Chartpoint. Mr Ragg is described as a chartered accountant.
By 2009 the trustees had liquidiated most of the scheme’s conventional assets, borrowed £21.9 million and invested 87 per cent of the combined total in property assets. The scheme also paid £1.155 million to Chartpoint for services as well as salaries and bonuses to some of the trustees. Pension schemes are not allowed to place the bulk of their assets in illiquid investments such as property, nor can they borrow, except in extremely limited circumstances. While pension trustees can be paid, most are not and bonuses are unheard of.
The affair also raises questions about the scheme’s auditors and bankers, which the regulator named as the Newcastle accountant Leathers LLP and Allied Irish Bank. However, Michael Leather, a partner in Leathers, denied to The Times that his firm had ever been the scheme’s auditor.
Bill Galvin, chief executive of the regulator, said the three men, who resigned from the scheme last October, were not fit and proper to be pension trustees. Their breaches were “serious and persistent ... This case unearthed some of the most worrying examples of mismanagement of a final-salary pension scheme that we’ve seen.”
The regulation of occupational pension schemes has been radically overhauled since Robert Maxwell stole hundreds of millions of pounds from Mirror staff pension funds.
There are an estimated 100,000 pension trustees in Britain; only 13 have been banned since 2005.
• High pension charges and the wrong choice of annuity can cut pension income by a quarter, meaning they would have to work into their 70s to cover the loss, the National Association of Pension Funds warns today. It says that saving early, paying in more and working longer all help, but that charges and annuity rates are key. Those in schemes with higher charges would have to work three years longer to get the same pension as those on the optimum rate.
Comment