£700k loans result in suspended jail term for ex-trustee
Pardon the Interruption
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The Pensions Regulator has successfully prosecuted a former pension scheme trustee and company director who played a key role in making several loans from the scheme to the employer.
Stephen Smith of Broughton-in-Furness, Cumbria, a former trustee of the Worthington Employee Pension Top-Up Scheme (WEPTUS) and director of the employer, admitted using pension scheme funds to make five prohibited loans to entities connected to the scheme’s sponsoring employer. The 64-year-old on Thursday received a prison term of 10 months, suspended for 12 months, and was ordered to do 150 hours of community service, as well as pay the prosecution costs of £1,000.
His honour judge Unsworth KC sentenced Smith in Burnley Crown Court on Thursday. The judge said: “Any mismanagement of pension schemes has the potential to cause real harm to people, many of whom will have sought to rely on those investments to keep them in later life. Mismanagement of schemes undermines public trust in the pension system in general.”
Nicola Parish, executive director of frontline regulation at the regulator, said: “Rules restricting trustees from lending scheme money to a sponsoring employer are there to safeguard workers’ pension pots. Smith chose to flout these rules and, as this prosecution shows, we will take tough action to punish those who risk the pension funds they are entrusted to look after.”
Loans from schemes to the employer are illegal under the Pensions Act 1995 and the Occupational Pension Schemes (Investment) Regulations 2005 and can lead to an unlimited fine and/or a prison sentence.
TPR said in this case, “ultimately all scheme monies were lost as the loans were converted into another employer-related investment which failed, although Smith was not a trustee at the time of the failed investment”.
Construction and property development firm Marcus Worthington and Company Ltd entered administration in September 2019 and was dissolved in January 2022.
Are jail sentences an effective deterrent for illegal activity in pensions?
