Selven Pension Scheme · CAS-45657-B7R7

CAS-45657-B7R7

Ombudsman’s Determination Applicant Mr R

Scheme Selven Pension Scheme (the Scheme)

Respondent Westbridge Pension Administration Limited (Westbridge)

Outcome

Complaint summary

1 CAS-45657-B7R7

2 CAS-45657-B7R7

3 CAS-45657-B7R7

“As the trustees of the scheme, we hereby resolve and confirm that the late [Mr S’s] fund value be duly allocated to [Mrs S] as the sole beneficiary of the fund.”

4 CAS-45657-B7R7

5 CAS-45657-B7R7

6 CAS-45657-B7R7

7 CAS-45657-B7R7

8 CAS-45657-B7R7

9 CAS-45657-B7R7

10 CAS-45657-B7R7

11 CAS-45657-B7R7

12 CAS-45657-B7R7

13 CAS-45657-B7R7

14 CAS-45657-B7R7

15 CAS-45657-B7R7

Mr R’s Response to the Preliminary Decision

16 CAS-45657-B7R7

17 CAS-45657-B7R7 Ombudsman’s decision I partly uphold Mr R’s complaint for the reasons set out below, which include my findings in relation to Mr R’s response to the Preliminary Decision. I also set out below clarification on the matters that I consider to be within my jurisdiction.

Jurisdiction

While Mr R is a Trustee of the SSAS and some aspects of his complaint relate to the conduct of his fellow trustees, it appears to me that his complaint is brought in his capacity as a member only. His complaint is principally that JHP (and its successor Westbridge), in its role as Trustee or in its role as administrator, maladministered the SSAS and caused him injustice as a member, even if some of the maladministration related to breaches of obligations to him as a Trustee. The remedy he seeks, being compensation for the financial loss he has incurred as a result of the maladministration, is in respect of its effect on his benefits as a member of the SSAS. To that extent, his complaint is within my jurisdiction.

For completeness, I confirm that I can only accept jurisdiction in respect of a dispute brought by trustees in respect of other trustees of the same scheme if the complaint is brought by at least half the trustees of that scheme1. Mrs T was appointed as a trustee of the Scheme by way of a Deed of Appointment made 23 January 2018 and the parties appear to agree that she had not been removed at the time when Mr R’s complaint was brought. So, at the time of the complaint, there were three trustees. As such, it appears that any dispute that might have been brought by Mr R as trustee of the SSAS against the other trustees is not within my jurisdiction. This, however, does not prevent me giving directions in respect of any rights, including his rights as a trustee, that he could enforce as a member or that have caused him injustice as a member.

The SSAS

Before proceeding to consider Mr R’s complaints, it is helpful to summarise how the SSAS was governed. The SSAS was established in 1988. As a SSAS, it was set up on the basis that all members would be trustees and all trustee decisions would be taken unanimously. A key feature of the SSAS was that no member could be excluded from any trustee decision and as, under general law, trustees are required to share all information relating to the trust with the other trustees, no member could be excluded from information relevant to the trust or to any trustee decision. Inland Revenue rules at the time also required the appointment of a professional ‘pensioneer trustee’ involved in all decisions other than investment decisions.

The SSAS was successively governed by deeds referred to at paragraph 9, above. At the time of the relevant events, the SSAS was governed by the 2004 Deed as amended by the 2006 Deed (which dealt primarily with changes relating to the

1 See sections 146(1)(e) and 146(1A)(c) of the Pension Schemes Act 1993 (“PSA”).

18 CAS-45657-B7R7 Finance Act 2004 and changed the role of JHP from ‘pensioneer trustee’ to ‘independent trustee’).

The 2004 Deed provided for each member’s benefits to be determined by the value of their ‘Fund Reserve’. It provided for each member’s Fund Reserve to be applied to provide death benefits for their spouse or other beneficiaries. At joining, each member had nominated a beneficiary for their death benefits and Mr S had nominated Mrs S.

The 2004 Deed, unlike the 1992 Deed, did not provide expressly for the pensioneer trustee (later independent trustee) to have a different role to the other trustees and in particular did not limit investment decisions to the member trustees (or ‘managing trustees’) as was the case under earlier deeds. It continued to provide for all decisions of the Trustees to be taken unanimously2. It permitted the Trustees to delegate any of their functions. It also provided for the Trustees to be exonerated and indemnified from the SSAS assets for any liability incurred except for “any breach of trust knowingly and intentionally committed by him”.

JHP acted originally as the pensioneer trustee and later the independent trustee or, in their own terms, “as co-trustee, professional trustee and scheme administrator”. Its role was to ensure the SSAS was operated in accordance with pensions legislation and tax regulations3. JHP also acted as administrator of the SSAS, maintaining records and accounts on behalf of the Trustees, liaising with investment managers, and preparing or arranging for the preparation of new deeds and resolutions. It charged fees for its services both as professional trustee and as administrator.

By 2017, there were only two members, Mr R and Mr S, and there were three trustees. It appears that Mr R had permitted Mr S to deal with most administrative tasks relating to the SSAS that were not dealt with by JHP and that much of the information relating to the SSAS was held on Mr S’s personal computer or in his files. Following Mr S’s death, Mrs T, his daughter and executor, took possession of these files, and dealt with matters relating to the SSAS even before being appointed as a Trustee in March 2018. It appears that at least some of these files were trustee files (i.e. containing information relating to the responsibilities of the Trustees under the SSAS) and not personal files and should have been shared with JHP and Mr R under the general duty to share information relating to the trust with the other trustees.

Information sharing and delegation

I have seen Mr R’s email of September 2017 and I am satisfied that Mr R consented to Mrs T’s involvement with administrative tasks on behalf of the Trustees, including payments and general administration. I am not satisfied that he waived his right to receive any information relating to the SSAS or that he delegated any of his rights and powers, including his right to be a party to any decisions concerning the SSAS or its assets. I am satisfied that he had delegated to Mr S responsibility for holding

2 Clause 9.3 of the 2004 Deed. 3 See JHP’s letter 10 November 2020.

19 CAS-45657-B7R7 documentation and correspondence relating to the SSAS and dealing with correspondence on behalf of himself and Mr S and that after Mr S’s death and from September 2017, he agreed that Mrs T could continue to hold such documents. I do not consider that this was an irreversible renunciation of his rights to see such documents. He remained entitled to see them.

Westbridge contend that they and JHP were under no obligation to provide Mr R with its internal documents regarding the payment to Mrs S. I disagree. Mr R as Trustee was entitled to information relating to the administration of the SSAS and in particular information regarding payments made by the SSAS (including calculation, authorisation and actual payment), including both information in the possession of JHP as Trustee (and under a duty to share information relevant to the trust with its fellow trustees) and in its possession as administrator (being under the supervision of the Trustees and required to account to the Trustees in relation to its actions in respect of administration of the SSAS). Failure to provide information to Mr R in a timely and open manner was maladministration. Save as considered below, such maladministration may not have caused Mr R any financial loss, but I consider that it caused him significant distress and inconvenience.

Payment to Mrs S

Mr R’s principal complaint relates to the payment of Mr S’s death benefit to Mrs S in cash on 5 June 2019 by allocating most of the cash held in the Fund to Mr S’s Fund Reserve, to his detriment.

Some reliance has been placed on the June 2019 Resolution signed by Mr R and Mrs T but not signed by JHP. Under clause 9.3 of the 2004 Deed, to be effective as a written resolution of the Trustee it needed to be signed by all the Trustees.

JHP having prepared the document and collected the underlying valuations and having made the payment to Mrs S, have asserted that JHP had approved it. However, JHP did not sign it and it is not a valid resolution of the Trustees. In any event, the Resolution does not provide for approval of an allocation of the assets and does not provide for approval of the payment in cash to Mrs S.

For clarity, I should confirm that, while the Resolution was not a valid resolution of the Trustees, the question of whether Mr S’s death benefit was duly allocated between Mr S’s potential beneficiaries is not a matter that I have jurisdiction to consider in a complaint from Mr R as a member of the SSAS.

The June 2019 Resolution is stated to confirm the value of the scheme assets as listed as at 24 April 2019, the value of Mr S’s share and the allocation of his share to Mrs S as sole beneficiary. Mr R has no standing to challenge the allocation of Mr S’s share to Mrs S and this allocation is not disputed. The validity of that allocation of benefit decision by the Trustees is not a matter I need to determine. I note that Mrs S had been nominated as Mr S’s sole beneficiary when he joined the SSAS.

20 CAS-45657-B7R7 What is disputed is the valuation of the assets at that date and the allocation of assets then made between Mr R’s Fund Reserve and Mr S’s Fund Reserve. As set out above at paragraphs 15 and 16, proposals had been made in relation to the allocation of the assets which had not been agreed. Mr R was seeking a transfer and preferred to receive his share of the Fund in the form of cash. Following the sale of Property One, JHP arranged for a valuation of the portfolio as at 24 April 2018. This included the Investment Portfolio.

It appears that there were errors in the valuation summary, which Westbridge has accepted, relating to rental payments: Mrs T had notified JHP that an overpayment of rent had been included that was repaid and JHP incorrectly failed to adjust for this. As Mr R was unaware of this error at the time, his signature on the Resolution does not amount to an acceptance of the error or the over-valuation of the scheme assets. I understand there was also an underpayment of rent which should also have been recognised. These issues are considered further below.

The more material point is the allocation of assets between Mr R and Mr S’s Fund Reserves. Nothing in the June 2019 Resolution deals with the allocation of assets.

The Fund Reserve of each member is defined in the 2004 Deed (disregarding the provision for certification by an actuary which was not seemingly used or required) as that part of the Fund as is “notionally attributable to that member solely for the purposes of calculating benefits”. It is clear from this and from the summary of the Fund assets in the Resolution (which lists all assets including the illiquid assets) that no part of the assets were allocated to either member. There was only one Fund, not two separate funds with separately identified assets.

As such, Mr R and Mr S had an equal interest in all scheme assets. The apportionment of the assets of the Fund, necessitated by Mr S’s death and his death benefits becoming payable and Mr R’s desire to take a transfer to a SIPP, was a material issue requiring a decision by the Trustees which needed to be a unanimous decision under the 2004 Deed. It appears that JHP, acting with Mrs T, proceeded to realise Mr S’s Fund Reserve by allocating the cash to Mr S’s Fund Reserve and then making payment to Mrs S in the absence of a valid Trustee decision.

JHP (and Westbridge) have not disputed that Mr R was not consulted and that he did not consent to this apportionment of the Fund assets. As all Trustee decisions were required to be taken unanimously, there was no effective decision to allocate the liquid assets to Mr S’s Fund Reserve prior to making payment to Mrs S. While Mr R had permitted Mrs T to deal with administrative tasks and payments, I do not find that he had delegated to her his powers in respect of Trustee decisions, nor do I find that JHP believed that he had done so: they had sought his consent to the matters set out in the Resolution. Apportionment of the Fund assets and payment, or approval of payment by Mrs T, of Mr S’s death benefit in cash to Mrs S without a unanimous decision of the Trustees was a breach of trust by JHP as Trustee and a breach of duty by JHP to exercise skill and care as administrator in ensuring payments were only made that were duly authorised. 21 CAS-45657-B7R7 The breach of trust was in paying away scheme assets without authority: JHP (or Mrs T acting with JHP’s knowledge and approval) paid away cash that was part of the Fund securing both members’ benefits and that had not been approved for allocation to Mr S’s share to the exclusion of Mr R’s. They did this not only without a valid unanimous decision from the Trustees but without notice to Mr R. Failing to provide information to Mr R as a Trustee about proposed decisions, transactions and payments relating to scheme assets was in itself a breach of trust. JHP was aware that there was no prior allocation of assets between the members as they prepared the Resolution on the basis of a single fund, that the allocation of assets was a matter for agreement on which agreement had not been reached by Mr R and Mrs T (and Mrs S) and that the payment to Mrs S was made without Mr R’s knowledge, consent or approval. This was a knowing and intentional breach of trust by a professional trustee. As a professional independent trustee, JHP had a special obligation to know and uphold the provisions of the SSAS and the requirement for unanimous Trustee decisions, proper authorisation of payments and information sharing between Trustees.

The breach of duty of skill and care by JHP as administrator was in:

66.1. making or allowing the payment to proceed without Trustee authority and without taking appropriate steps to confirm that there had been a unanimous agreement by the Trustees; and

66.2. failing to provide accurate and timely information about the valuation of the investments.

For the reasons set out above, I uphold Mr R’s complaint that JHP maladministered the SSAS by splitting the Fund between himself and Mrs S by allocating the illiquid assets to Mr R and making a cash payment to Mrs S without authority, i.e. without a unanimous decision of the Trustees, and by failing to take account of certain over- and under- payments to the Fund in determining the value of the benefit payable to Mrs S. JHP’s liability for breach of trust is to account to Mr R for the loss he suffered in consequence of the payment of the cash to Mrs S and the allocation of the illiquid assets to Mr R.

JHP’s liability for failure to exercise skill and care as an administrator is to put him in the position he would have been in but for the payment of the cash to Mrs S without authority. While the basis may be different, in practice, the remedy for breach of trust as a Trustee or breach of the duty of care as an administrator is not materially different in this case.

I note Mr R’s statement that he made consistent requests for cash to be allocated to him and that his need for a transfer in cash should have been prioritised because Mrs S could more easily have accepted a combination of investments, property and cash. However, I am not persuaded by the evidence that this would have been agreed. Mr R also submitted, at paragraphs 41.2, 41.3, 41.5 and 41.9 above, in his response to my Preliminary Decision, that agreement could have been reached with

22 CAS-45657-B7R7 Mrs T and that there was ample time for the trustees to resolve the allocation within the two-year period following Mr S’s death. My Determination is on the basis of the facts that agreement was not reached and the tax implications of the delay did not authorise the other trustees to pay out funds without unanimous agreement. In the absence of agreement, Mr R and Mr S had an equal interest in the cash and the non- cash assets.

I therefore determine that JHP should compensate Mr R for 50% of the loss he suffered from the allocation to him of the non-cash assets of the Fund and the payment of cash to Mrs S on 5 June 2019, including 50% of:

70.1. the cost of liquidating the assets;

70.2. the losses arising from the suspension of the Suspended Investments; and

70.3. the fees charged to the Fund in respect of the period since 5 June 2019.

I note Mr R’s comments at paragraph 41.10 above, giving reasons why he is of the view that my award in this regard should be on a 100% basis. While JHP had a particular responsibility as professional trustee and administrator for the good administration of the SSAS, it was the responsibility of all trustees to agree the split of assets as necessary following the death of Mr S. JHP’s responsibility is reflected in the award for distress and inconvenience at paragraphs 88 to 91, below. JHP was not solely responsible for the investments as the Scheme was a SSAS, so I have not found that it was responsible for 100% of the investment related losses. My Determination is principally about providing Mr R with his entitlement under the trust on the basis of the factual finding that no split of assets was in fact agreed and the legal finding that unanimous agreement was required. Mr R’s comments do not change the outcome.

In relation to Mr R’s comments at paragraph 41.12 above, the part of my award for the diminution of Mr R’s fund reserve, described in paragraph 35.9 above, relates to diminution during the delay in facilitating the transfer. I have not found that there was a loss on 5 June 2019 or that JHP was responsible for the inability to dispose of some of the investments on 5 June 2019, due to their suspension. As this is a calculation of any diminution from 5 June 2019 to the date of calculation, and as any diminution sum is payable within 28 days of my Determination, loss of interest is not applicable.

Disposal of shares and Suspended Investments

Westbridge and JHP accepted Mr R’s complaint in respect of the delays in disposing of the K3 Shares because JHP had failed to promptly forward the share certificate needed and delays in clarifying the implications of gifting the share certificates.

Westbridge and JHP have not accepted Mr R’s complaint in respect of the disposal of the shares held via Computershare. JHP accepted that the difficulties arose from Computershare’s original registration of the shares in the name of the principal company of the SSAS, Selven Ltd and that JHP failed to reply promptly to Mr R’s

23 CAS-45657-B7R7 enquiries over an extended period. While ensuring the correct registration of scheme assets in the name of the SSAS or the Trustees was the responsibility of JHP as a Trustee, it was also the responsibility of Mr R, and while I consider that JHP may have caused Mr R distress and inconvenience in not responding, I do not find that it is responsible for any loss Mr R suffered. I acknowledge Mr R’s comment, at paragraph 41.4 above, but it does not change the outcome.

While there were administrative errors in relation to obtaining signatures and LEI numbers to allow the placing of instructions to dispose of the Suspended Investments between July and October 2019, given the dates on which the Suspended Investments became suspended (3 June 2019 and 25 July 2019), I do not find that these delays caused Mr R any additional losses.

I do consider that JHP’s conduct in failing to respond promptly to Mr R in these matters and the various administrative errors in failing to maintain necessary data in respect of scheme assets fell below the standard to be expected of a reasonably competent administrator and professional trustee.

Mr R has submitted, in paragraph 41.15 above, that the directions in the Preliminary Decision fell short of making a statement as to how his compromised transfer could now be completed. I agree with Mr R’s comment and have addressed it in my Directions at paragraph 92.4.

Delays in respect of Mr R’s requested transfer to his SIPP

Westbridge and JHP accepted that there had been confusion about Mr R’s query regarding the Partial Transfer in October 2019, and that it then failed to bring the query to a conclusion at the time. I agree. Mr R had asked to transfer his Fund Reserve in full and in cash to his SIPP with Charles Stanley. This was not possible because of the Suspended Investments and a partial transfer was suggested as an alternative. JHP undertook to check information and then failed to provide a response or deal with the matter promptly. I do not find that these delays and failures caused Mr R any additional losses, but it would have caused him distress and inconvenience.

Mr R disputed the Adjudicator’s finding that JHP was not the cause of him being left with the Suspended Investments which impeded his ability to transfer out of the Scheme. However, by the time Mr R indicated, on 10 June 2019, that all investments should be sold, one of the investments had already been suspended on 3 June 2019. So, I find that, regardless of JHP’s performance in arranging the disposal of the investments, it could not be held responsible for failing to dispose of an investment that had already been suspended before his request was made.

The possibilities considered in relation to the Suspended Investments that were impeding Mr R’s transfer, were renunciation of the investments or a partial transfer excluding the Suspended Investments. I understand that both entailed uncertainty as to potential adverse tax implications for Mr R’s share of the Fund. However, as I have found that JHP was not responsible for being unable to dispose of the Suspended

24 CAS-45657-B7R7 Investments, it follows that it cannot be held responsible for compensating Mr R for any consequent adverse tax implications of holding or disposing of them.

Mr R was of the view that it was unfair for the Adjudicator to say that JHP had not breached his statutory right to a CETV as he had not formally requested a CETV illustration that would have given rise to the statutory right. While I understand Mr R’s argument that there appeared to be no point in requesting a CETV illustration when he knew a transfer was unlikely to be possible at that time, the Adjudicator’s statement is a matter of fact.

81.1. The rules regarding the statutory right to a transfer are contained in Part 4ZA of the Pension Schemes Act 1993 (PSA 1993). Section 94(1) provides that “a member of a pension scheme who has received a statement of entitlement under section 93A acquires a right to take the cash equivalent shown in that statement”.

81.2. Section 93A(1) provides that the trustees or managers of a pension scheme “must, on the application of any member, provide the member with a statement of entitlement in respect of the member’s transferrable rights.”

As Mr R had not made an application under section 93A(1) of PSA 1993, it follows that he had not yet acquired the statutory right to a CETV under section 94(1), so there was no statutory right in force at the time for the Trustees to breach. In this regard, the Adjudicator is correct.

I note for completeness that Mr R was of the view that the Adjudicator was incorrect to say he had asked JHP to make enquiries of HMRC regarding the tax penalties in relation to disposal of the Suspended Investments. Rather, JHP had offered to make enquiries. While I find that Mr R is correct, it is an academic point which does not change the outcome.

Delays in respect of PCLS

Westbridge accepted this part of Mr R’s complaint, given the errors that had been made and the time that was taken to correct them. I agree and determine that Mr R suffered injustice caused by JHP’s maladministration in being unable to access his PCLS. The delay arose because of errors relating to receipt of an overpayment of rental income from a tenant of a SSAS property which was wrongly included in the value of the Fund when Mr S’s death benefit was calculated and a rental income payment that was received by JHP was not credited to the Fund. These were administrative errors by JHP in breach of their duty to carry out the administration with due skill and care. JHP’s failure to provide prompt, open and transparent information about these issues to him was further maladministration, although I do not find that he suffered additional financial loss from such maladministration. I do consider that it would have caused him distress and inconvenience.

25 CAS-45657-B7R7 Excess fees and charges

As above, I have found that the payment of Mr S’s death benefit in cash on 5 June 2019 caused Mr R injustice in that he has borne all fees and charges relating to the administration of the SSAS since that date and he should be compensated for 50% of those fees and charges.

In addition, there was considerable maladministration relating to the ongoing administration of the SSAS before and after that date. This included the matters of delays in providing information and responding to queries, keeping correct records in respect of shares, including share certificates and ensuring correct registration of shares owned by the SSAS, failures to promptly disclose and explain the details of overpayments and underpayments. Having regard to this considerable maladministration, I consider that JHP failed to provide a proper service either as a professional independent trustee or as administrator of the SSAS and that its own fees and charges in respect of the period from 5 June 2019 should be subject to a 100% discount.

Mr R, in his response to the Preliminary Decision, found a contradiction regarding the 50% award in paragraphs 69.3 and 81 of the Preliminary Decision and the 100% in paragraph 82. Paragraphs 69 and 81 of the Preliminary Decision relate to non-JHP costs and fees on a 50% basis as these were correctly incurred but should not have fallen entirely to Mr R. Paragraph 82 of the Preliminary Decision relates to JHP’s own SSAS administration charges, which I find should be discounted on a 100% basis, as the services for which they charged have substantially not been provided. Mr R’s comments do not change the outcome.

Award for distress and inconvenience

The Adjudicator viewed JHP’s actions regarding Mr R’s unfulfilled request for a PCLS payment, the errors that caused the request to be unfulfilled, the delay in putting the errors right, and the failure to deal satisfactorily with the question of a partial transfer, as maladministration.

I agree with the Adjudicator that JHP’s errors, actions, and inactions in relation to these parts of Mr R’s complaint addressed at paragraphs 39.2 and 39.3, above, amount to maladministration that has caused Mr R serious distress and inconvenience.

Where I find that maladministration has occurred and that the maladministration and efforts required to put matters right has caused distress and inconvenience, I may make an award for non-financial injustice. In the case of non-financial injustice, it is my aim to make an award that represents appropriate compensation commensurate with the distress and inconvenience. Having regard to the seriousness and persistence of the delays, errors, failure to maintain records and registers and withholding of information, I determine that an award of £2,000 is appropriate.

26 CAS-45657-B7R7 Mr R has said in his response to the Preliminary Decision, that the award of £2,000 does not reflect his severe distress and inconvenience. My awards for non-financial injustice will fall into one of the following five categories of awards; nominal, significant, serious, severe and exceptional. The amounts range from nil where I consider distress and inconvenience to be nominal, to £2,000 where I consider it to be severe, or more only where it is considered to be exceptional. I consider that the distress and inconvenience Mr R has experienced falls into the severe category but does meet the threshold to be considered exceptional.

Directions

92.4.

Camilla Barry

Deputy Pensions Ombudsman 30 July 2025

27