A former pension scheme trustee has been given a 10-month jail term after admitting to using £700,000 of members’ funds to make loans to entities connected to the sponsoring employer.
This legal action was was brought by The Pensions Regulator (TPR) against Stephen Smith, 64 from Cumbria — a former trustee of the Worthington Employee Pension Top-Up Scheme and a director at the sponsoring company. Smith pleaded guilty and the jail term has been suspended for 12 months.
The judge in the case told Smith he would also have to complete 150 hours of unpaid work in the community and pay £1,000 in prosecution costs.
The court heard Smith had played a central role in running the scheme but had failed to act in the best interests of its beneficiaries or with impartiality and was negligent in the performance of his trustee duties.
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.
At the sentencing, the judge HHJ Unsworth 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”.
TPR’s executive director of frontline regulation Nicola Parish says: “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.”