Pension trustees risk large fines or even jail time if they flout investment rules designed to protect savers, The Pensions Regulator (TPR) has warned, as it confirmed plans to share guidance on what good trusteeship looks like as part of its work to raise standards.

The warning was shared alongside an update on TPR's recent enforcement action against two former trustees who broke employer-related investment (ERI) rules, which resulted in fines and a suspended jail sentence for those involved.

Former trustee of the Worthington Employee Pension Top-Up Scheme, Stephen Smith, was handed a suspended jail term after admitting to using scheme funds to make five prohibited loans to entities connected to the scheme’s sponsoring employer, Marcus Worthington and Company Ltd.

In addition to this, a second trustee, John Marcus Worthington, was handed a £29,000 penalty under section 10 of the Pensions Act 1995.

The regulator launched its investigation in 2019 after receiving a breach of law report and uncovered prohibited employer-related loans, including three totalling around £400,000 to Stonewell Property Company Limited, the parent company of the sponsoring employer.

Following its investigation, TPR pursued a criminal prosecution against Smith, who later pleaded guilty to making five prohibited loans in October 2022, before being given a 10-month prison sentence, suspended for 12 months, and ordered to complete 150 hours of community service and pay £1,000 in prosecution costs, in January 2024.

Although the regulator had also considered prosecuting Worthington, it said that his personal circumstances led it to conclude the public interest test for prosecution was not met and instead opened a regulatory case against him.

TPR’s independent Determinations Panel subsequently determined that Worthington should pay a total penalty of £29,000 for six ERI breaches, £4,000 for the first breach, and £5,000 (the maximum) for the remaining five breaches.

Further action has been taken since then, as an independent trustee was also later appointed by TPR to the scheme in late February 2025.

This was deemed a priority in this case, as the scheme’s employer was dissolved on 5 January 2022, and Worthington, becoming the sole scheme trustee with exclusive responsibility in carrying out all trustee duties, had failed to carry out any trustee duties for several years.

According to TPR, the scheme had effectively lacked proper administration for several years, as the last recorded trustee activity was completing and submitting a scheme return in March 2019.

However, the regulator confirmed that whilst all scheme funds were ultimately lost because the loans were converted into a failed investment, if eligible, the independent trustee will be able to pursue a claim from the Fraud Compensation Fund on behalf of members.

Indeed, TPR executive director of regulatory compliance, Gaucho Rasmussen, said that, "with an independent trustee now in place, the focus can shift to restoring scheme funds wherever possible.”

“The pensions system depends on savers having confidence that trustees act with integrity, put members’ interests first, and possess the right knowledge and skills," Rasmussen added.

“When trustees flout investment rules or fall short of expected standards, it undermines that confidence. That’s why we acted to replace them and pursued both criminal and regulatory sanctions."

TPR also used the case as an opportunity to emphasise the "central role" trustees play in pensions and protecting savers, noting that it recently outlined the key traits and behaviours it expects from them, including being highly skilled and diligent.

This includes having a good technical knowledge of the requirements of the trustee role, including understanding TPR’s ERI guidance, which sets out the restrictions on using scheme funds and the risk of prosecution.

The regulator said that it also expects to see a collective effort to raise standards of trusteeship and, through its expanded supervisory approach, would ensure all schemes meet the basics set out in its general code.

To support this, it confirmed that it is planning to produce guidance on what good trusteeship looks like.

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