The Work and Pensions Committee launched an inquiry on Monday to “look at the lessons that can be learned” from the collapse of the pension schemes of Norton Motorcycle Holdings Ltd, where an employer defrauded pension scheme members in 2012. 

The committee began the inquiry so that members are better protected in future and receive speedier compensation from the Fraud Compensation Fund. 

 

MPs will examine the Pensions Regulator’s approach to preventing the loss of pension assets through fraud or dishonesty and see if the process of assessing eligibility for compensation and making payments can become quicker.  

 

The committee will also scrutinise the role played by independent trustees, the Pensions Ombudsman and the Pension Protection Fund, which administers the Fraud Compensation Fund. 

 

“The collapse of the Norton pension schemes has caused a huge amount of worry and financial hardship for the members, who fear they have lost their pensions and have been left in limbo when it comes to whether they will receive any compensation at all,” said the chair of the Work and Pensions Committee, Sir Stephen Timms. 

 

He said the inquiry would look at the lessons that can be learned from this “to ensure the right regulatory arrangements are in place both to protect pension rights better and ensure compensation is paid promptly when things go wrong”. 

 

Stuart James Garner from Castle Donington, former sole director and sole pension trustee at Norton, was prosecuted by TPR and received a suspended jail sentence in March 2022, having invested the pension scheme money exclusively in Norton preference shares.  

Making employer-related investments worth more than 5% of the current market value of a scheme is a criminal offence. The maximum penalty for a breach of ERI rules is an unlimited fine and/or a prison sentence of up to two years. 

 

A spokesperson for the Pensions Regulator said: “We welcome the Work and Pensions Committee’s inquiry into the Norton Pensions Schemes and the Fraud Compensation Fund and we will respond in due course.” 

 

The spokesperson added: “We successfully prosecuted Stuart Garner for three serious pension-related criminal offences. As a result, he received an eight-month suspended jail sentence, was banned from being a company director for three years and ordered to pay costs.” 

 

In March this year, the regulator issued new guidance to remind companies and trustees of the limits on self-investment and its potential consequences. 

 

    

The speed with which action was taken and compensation will be received will be at the heart of the inquiry. Whistleblowers first raised concerns with the regulator in 2013, nine years before Garner’s guilty plea, according to the committee.  

 

Sir Stephen wrote to the PPF in May this year about the speed of compensation for Norton victims. The PPF responded that the process required numerous legal tests, adding: “In the case of the schemes, the conditions for an eligible claim are not yet met. Specifically, there has not been a qualifying insolvency event.” 

 

It said that it was however looking at ways “to work flexibly and pragmatically (including looking at innovative solutions) to help progress to payment as quickly as possible”. This would include paying compensation before a recovery of scheme assets is made where this is expected to be very low, but the PPF points out that “the legislation is clear that, if there are recoveries to be made without disproportionate cost and within a reasonable time, the trustees must make those recoveries before any compensation can be paid”. 

 

In 2019, Dalriada Trustees was appointed to the schemes by TPR, before the company went into administration in 2020. Dalriada said in April this year that it expects to be able to recover a small proportion of the missing funds through the liquidation and bankruptcy processes and is waiting to be able to make a claim to the Fraud Compensation Fund. Norton’s three schemes had 227 members in total.   

 

In June 2020, the ombudsman upheld a complaint brought by Dalriada and 31 scheme members, ordering the restitution of the lost money with interest of 8% p.a. For the injustice caused, Garner was also ordered to pay £6,000 per applicant, while scheme administrator LD Administration Ltd was told to pay £3,000 to each applicant “subject to funds being available given its dissolution”. 

 

MPs now want to hear from Norton pension scheme members and plan to hold an event to discuss their experiences. Further information on how to register interest will be published shortly.  

 

The committee added that it welcomes inquiry submissions covering all or some of the questions below by 27 October 2023. 

 

1. Does TPR have the powers it needs to prevent trustees acting dishonestly and in breach of their trustee duties, leading to the loss of pension scheme assets, as happened in the Norton case according to the Pensions Ombudsman? 

a) Are the right regulatory arrangements to prevent a similar case happening again? 

2. Could different regulatory arrangements have delivered a faster resolution of the Norton case, or a similar case? 

3. How could co-ordination with other (non-pension) bodies be improved? 

4. How could communications with scheme members of collapsed pension schemes be improved while at the same time protecting scheme assets? 

5. How could the process for applying to the Fraud Compensation Fund be simplified and sped up? 

6. What claims might the FCF expect in future and are there schemes which might be eligible but do not have the support to make a claim?