TPO upholds improper investment complaint

The Pensions Ombudsman (TPO) has upheld a complaint against the trustee of the Grosvenor National Ltd Retirement Benefits Scheme, Robin Kench, regarding the improper investment of the scheme’s funds.

The improper investment allegations related to funds transferred in by members being divided between Pension Assist, a company which purportedly sought to match savers with new IFAs and pension schemes and was owned by the trustee’s brother, and Realsave, a business intended to provide short term finance to companies which could not otherwise get credit.

Kench, who was also an employee of Pension Assist, was judged by the ombudsman to have acted in breach of trust by breaching his fiduciary duty to manage conflicts of interest, failing to have knowledge or understanding of scheme documents and pensions law, and providing false information to members.

Additionally, it was found that the trustee had committed acts of maladministration by failing to regard The Pensions Regulator’s code of practice and failing to establish that the payment of members funds to them on joining the scheme constituted an unauthorised payment.

The scheme was set up in 2012 after Darryl Kench and Robin Kench were informed of an investment proposal by Stuart Stone, whom the former claimed he believed was an IFA.

Stone proposed the establishment of a pension scheme which would invest in a finance company named Realsave, which had been founded by his wife in July 2012, assuring the Kench brothers that he could cover the required returns if the business was not sufficiently profitable.

TPO said the trustee then failed to investigate the validity of these assurances or carry out any due diligence in relation to Realsave, which had at this point no annual returns or accounts, had received no investments, had lent no money and had no contracts in place.

Speaking at an oral hearing with TPO which the scheme’s trustee, Robin Kench, had failed to attend, Darryl Kench said he had not been aware of a pension scheme trustee’s duties under statute, nor of TPR’s website or guidance available on the website.

In August 2013, Stone was arrested and charged with fraud in relation to a separate investment arrangement, being sentenced to six years in prison in December 2014 despite assuring the Kench brothers that he was “confident he would be cleared”.

Realsave was subsequently dissolved in October 2014 and £1,141,680 that Stone paid under a confiscation order to avoid a further seven years behind bars was not returned to the scheme, therefore leaving members facing the prospect of being out of pocket.

Recalling her experience, complainant Mrs T, one of three complainants grouped together, asserted that her home meeting with Pension Assist in February 2013 had seen Darryl Kench tell her that transferral into the scheme would see her receive 24 per cent of the £175,606 transfer figure in cash.

She claimed to have been told by Darryl Kench that the remaining £133,460 would be invested into the scheme for five years, following which she would receive a payment of £175,605 which could be transferred again.

She added that she had not been aware that her pension would be invested in Realsave.
Of the amount transferred in by Mrs T, 50 per cent was invested in Realsave, 30 per cent was paid to Pension Assist and 20 per cent was paid to the member.

The Grosvenor scheme had 7 members, who had contributed a total of £615,000 of their retirement savings into it.

However, the ombudsman said he had seen no evidence that these were actually applied to purchase preference shares in Realsave, as copies of documents filed at Companies House did not show the scheme or trustee to have been a shareholder at any point during Realsave’s existence.

The trustee of the scheme has been instructed by the ombudsman to pay into the scheme the total amount of funds transferred in, the total amount of any payments made to the scheme’s members in relation to their respective transfers into the scheme and interest at the rate of 8 per cent per annum simple to the date of payment.

Additionally, the trustee was instructed to pay Mrs T and the additional applicants £6,000 each for “exceptional maladministration causing injustice”.

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