Md Property Solutions Pension Scheme · CAS-65731-T5X2

CAS-65731-T5X2

Ombudsman’s Determination Applicant Mr M

Scheme M&D Property Solutions Pension Scheme (the Scheme)

Respondent Empowered Pensions Ltd (EP)

Outcome

Complaint summary

Background information, including submissions from the parties

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11.2. A draft instruction to DCD to cease providing services to the Scheme (the DCD Termination Letter). The effective date of the DCD Termination Letter was stated as date of signature, or date of expiry of any minimum notice period, if later.

The notes included with the Take-over Form provided the following guidance:- 2 CAS-65731-T5X2 “…

4) Once the documents are obtained it is important for the Trustees to be assured that the present Scheme Administrator/Corporate Trustee has executed their duties correctly and the Assets are transferrable to the new arrangements. If this has not been undertaken competently it may force the Board to remain as they are, effectively tying the Scheme to the present arrangements and frustrating the will of the Trustees. Empowered Pensions Ltd will assess the documents as part of the take on procedure and report if there are matters to be corrected before the scheme can be ‘taken over’.

5) If the scheme assets are all held/executed correctly then the present Corporate Trustee and Scheme Administrator can be given notice in writing. It is important not to do this until items 1-4 have been attended to.

6) The outgoing Scheme Administrator will then take responsibility for registering the new Scheme Administrator for the scheme with HMRC. Once this is complete the outgoing Scheme Administrator will then remove themselves from the position with HMRC.

7) A legal document will then be prepared by the new Scheme Administrator, ‘appointing’ any new Trustee and ‘retiring’ any outgoing Trustee. This Deed of Appointment and Retirement must be agreed between the parties before it can be executed. This agreement can take some time to achieve.

8) The new Trustees and Scheme Administrator will then liaise with the outgoing and ensure that the ownership of assets is correctly amended. Again, this can require legal processes/documents and also take some time.

9) If the banking arrangements are being changed then a new account must be established and be signed off by the Trustees as working correctly before any money flows into it.

10) All parties paying money into the Scheme such as borrowers, Tenants, the Employer(s) must then be informed of the new bank details. It is often good policy to let the old bank account continue for some months to ensure anticipated payments are not lost.

11) Only when this is complete and the outgoing Scheme Administrator/Trustees have received their due fees will the balance of cash be transferred to any new bank account.

…”

In February 2019, Mr M discussed changes needed to the draft Deed of Appointment and Retirement (the DOAR) with DCD and EP. He also provided some further information to EP regarding the status of the Scheme, including that there was a remaining cash balance in the Scheme’s bank account of £50,000 after the Loan Back and the Employer’s first repayment on the Loan Back was due on 3 April 2019. 3 CAS-65731-T5X2 He asked for guidance as to how the first Loan Back repayment should be made, if any paperwork was required and what needed to be done to re-borrow that repayment. He also indicated that he intended to invest around £50,000 of any cash remaining in the Scheme’s bank account.

EP sent the Member-Trustees an amended DOAR for signature, which Mr M returned on 21 February 2019. EP forwarded it to DCD on 25 February 2019. EP also advised Mr M to continue with the existing Loan Back repayment arrangements until the Take- over Process was complete, which it hoped to be by April 2019.

Also on 25 February 2019, the Administration Agreement between the Member- Trustees and EP (the Administration Agreement) was executed. While the Administration Agreement was dated 25 February 2019, the definition of “effective date” in the document was not completed.

DCD is said to have sent a further-revised DOAR to EP on 13 March 2019, but EP said it did not receive it. DCD sent a further copy by email on 27 March 2019 to EP, who forwarded it to the Member-Trustees to re-sign. Mr M has said the DOAR was returned to EP on 28 March 2019, but EP said it did not receive it and asked him to send it again. On 18 April 2019, EP received and executed the completed DOAR and forwarded a copy to DCD.

On 22 May 2019, DCD asked EP to register as the Independent Trustee and Administrator with HM Revenue & Customs (HMRC). EP tried unsuccessfully to register on two occasions, before the registration was completed on 27 June 2019.

On 12 June 2019, EP instructed Metro Bank to open the New Bank Account. Metro Bank informed EP on 18 June 2019 that it was unable to verify the identity of the Member-Trustees’ using the addresses and telephone numbers provided. EP obtained new identity documents from the Member-Trustees and forwarded them to Metro Bank on 27 June 2019.

On 1 July 2019, DCD confirmed it had completed its removal with HMRC as the Scheme’s administrator and trustee.

On 19 August 2019, EP asked Metro Bank for an update on the opening of the New Bank Account, but Metro Bank was of the view that EP had not responded to its query about identity verification.

On 28 August 2019, DCD requested a Deed of Assignment in respect of the Scheme’s loan-back to the Employer.

On 3 September 2019, it became apparent that the Member-Trustees’ non-UK residence and non-UK addresses were preventing successful completion of identity verification required to open the New Bank Account.

On 6 November 2019, the Member-Trustees made a formal complaint to EP, in which it said:-

4 CAS-65731-T5X2 23.1. DCD had requested a Deed of Assignment from EP in May 2019 and bank account details in September 2019. Both Mr M and DCD had chased EP several times, but emails were either ignored or delayed and did not answer the questions posed.

23.2. EP had told DCD on 4 October 2019 that it was awaiting bank account details from Metro Bank, but at the same time, it became clear that the identity verification process had not been concluded as EP then asked Mr M, for the fourth time, to provide further identity documents.

23.3. Mr M doubted EP’s competence and capacity to act as a scheme administrator for any SSAS and had serious concerns that the Scheme was effectively a training and development exercise for EP. EP’s maladministration and poor case management had caused delays which resulted in significant opportunity costs to the Scheme and to the Employer.

On 11 November 2019, new identity verification documents were sent to Metro Bank and the New Bank Account was opened on 20 November 2019. On 25 November 2019, EP instructed DCD to close its trustee bank account for the Scheme. Mr M provided his authority for the closure to DCD on 28 November 2019. EP requested closing bank statements from DCD, which were received on 14 January 2020. EP said this marked the point in time where it was in a position to fully administer the Scheme and it aimed to arrange an initial “onboarding call” with the Member- Trustees.

In January 2020, the Member-Trustees instructed EP to open an investment account for the Scheme with Bestinvest. Then, in February 2020, approximately £25,000 was invested in line with the August 2018 Portfolio Proposal. The remainder of the balance in the New Bank Account was invested in what Mr M described as lower-risk investments, which he said were selected due to Covid-related stock-market volatility at that time. The lower-risk investments were retained until August 2020, when they were encashed and the proceeds were reinvested in line with the August 2018 Portfolio Proposal.

The onboarding call first mentioned by EP in January 2020 was offered on 14 May 2020 and took place on 11 June 2020.

The November 2019 Complaint was discussed at the annual meeting of the board of trustees in June 2020 and at online meetings between the Member-Trustees and EP on 21 July 2020 and 6 August 2020. At the meeting on 6 August 2020, EP accepted responsibility for failings in its administration, processes and staff training. It did not accept other parts of the Member-Trustees’ complaint in relation to the loss of investment opportunity. EP’s position is described more fully at paragraph 29, below.

EP refunded fees totalling £2,100 to the Scheme. Mr M did not accept that this adequately compensated the Member-Trustees for EP’s failings.

5 CAS-65731-T5X2 Summary of EP’s position

EP accepted that the areas where it was at fault were:-

29.1. take-over processing times were unnecessarily and unacceptably long, although there were parts of the process that were out-with its control;

29.2. the failure to respond to the November 2019 Complaint in a timely or acceptable manner;

29.3. insufficient staff training and a failure to control the Take-over Process and avoid delays, particularly in relation to the DOAR.

29.4. failure to identify and resolve issues with identity verification for trustees who were domiciled overseas; and

29.5. failure to ensure the Member-Trustees were clearly aware that they continued to have a responsibility for their own investment decision making in the ‘take over’ period.

EP did not accept that it was responsible for the loss of investment opportunity claimed by Mr M. It provided the following further comments in support of its position:-

30.1. The Member-Trustees’ had not taken any steps to action the July 2017 Transfer Suitability Report from July 2017 to January 2019, the latter being when they completed the Take-over Form to commence the transfer of services to EP. In this interim period, the Member-Trustees could have given investment instructions to DCD but did not do so. The Member-Trustees did not raise the issue of being unable to invest until the matter of compensation was considered as part of the November 2019 Complaint.

30.2. In the initial stages of the Take-over Process, the Member-Trustees had indicated their intention for the Scheme to invest in asset-backed lending, amongst other things, once the transfer of administration to EP had been completed. As asset-back lending was not included in the investment reports to which the Member-Trustees referred in their complaint, EP questioned if it was ever the Member-Trustees’ intention to invest in line with the reports.

30.3. At a meeting of the trustees on 11 June 2020, the Member-Trustees indicated they were happy with the Scheme’s funds remaining on deposit until the market settled and that they subsequently intended to invest in Commercial Property.

30.4. Following the June 2020 meeting, the Member-Trustees made several investment decisions including holding money on deposit with Bestinvest, Asset Backed Lending with Crowd Property and Physical Gold with Bullion Vault, none of which were considered in the 2017 investment report.

6 CAS-65731-T5X2 Summary of Mr M’s position

Mr Y was of the view that:-

31.1. The loss of potential investment returns due to EP’s delays was in excess of £10,000 and he also experienced the significant distress and inconvenience of trying to deal with the issues while being ignored by EP. The fees waived by EP did not compensate the Member-Trustees adequately.

31.2. In the case of Mr T v The James Hay Partnership (Mr T v James Hay) (reference CAS-38354-V5L8), TPO had decided in favour of the applicant in his claim for loss of opportunity to invest in the stock market due to a delay in the transfer of pension assets.

31.3. EP did not take into account relevant calls and email exchanges that took place in the three months immediately prior to the transfer process commencing in late November 2018.

31.4. The Member-Trustees had indicated their investment intentions in a telephone call with EP on 24 September 2018. They had provided a copy of the August 2018 Portfolio Proposal which included a list of the recommended funds in which they were planning to invest.

31.5. The transfer process began on 30 November 2018, the date the webform application was completed, and not 15 January 2019, as EP stated in their response. The start of the process was delayed by technical glitches with EP’s webform.

31.6. The Member-Trustees had not instructed DCD to set up the Investment Account with Bestinvest as this would have delayed the Take-over Process and resulted in additional fees. In any event, DCD would not have accepted any investment instructions from the Member-Trustees after the DCD Termination Letter had been signed.

31.7. The Member-Trustees’ investment instructions in February 2020 did not entirely follow the portfolio illustration in the August 2018 Portfolio Proposal as adjustments were made due to the effect of the Covid-19 pandemic on the financial markets.

Adjudicator’s Opinion

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Summary of investment findings

32.12.

it remained the case that no actionable investment instructions had been discussed or agreed with EP, as the Independent Trustee, at that time. So, it could not be said that EP as the Independent Trustee or EP as the administrator was responsible for a failure or delay in executing the Member-Trustees’ investment intentions.

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Mr M did not accept the Adjudicator’s Opinion, and the complaint was passed to me to consider. Mr M provided his further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note below the additional points raised by Mr M.

Ombudsman’s decision Mr M’s further comments

Mr M’s comments included, amongst other matters, that:

34.1. The Member-Trustees had at the outset supplied EP with their adviser’s FE Analytics model portfolio and confirmed in February 2019 that approximately £50,000 would be invested once the account was operational;

34.2. When trading became possible in February 2020, they immediately implemented £25,000 of those recommendations in line with the model, save that one fund was unavailable on the platform, demonstrating what they intended to do;

34.3. No evidence suggests they had any reason not to follow the model once access was available;

34.4. While certain investments may have been permitted before EP’s appointment, no brokerage account existed under DCD and, having served notice to move to EP, it was neither practical nor appropriate to instruct DCD to start opening new accounts;

34.5. EP indicated in Feb 2019 that completion was hoped for by April 2019 and the Member-Trustees therefore reasonably expected imminent trading access and acted accordingly;

34.6. While the Member-Trustees could have considered investment decisions, they could not execute them because the takeover left them with no operable banking and broking services; had they known the process would run into late 2019/early 2020, they would have asked DCD to open an interim brokerage account, but they did not do so because they relied reasonably and in good faith on EP’s “April 2019” indication;

34.7. The £2,100 fee refund is not proportionate to the loss of investment opportunity suffered; 11 CAS-65731-T5X2 34.8. The Tenconi v James Hay decision, while concerned with a transfer between providers, establishes a principle that is applicable in this case, namely that, where maladministration delays access to investment, the decision-maker should:

• identify the non-negligent date by which trading should have been possible;

• decide, on the balance of probabilities, what the member would have done at that date; and

• quantify the missed return accordingly, without demanding proof of each specific trade;

34.9. The loss suffered should be calculated assuming a non-negligent date of April 2019 based on EP’s Feb 2019 indication (“by April 2019”) as the counterfactual date by which trading should have been possible, and using the FE Analytics model and Feb 2019 emails as evidence of the intended allocation.

34.10. The need for a formal “suitability report” or a fully documented “personal recommendation” should not be applied as an overstrict evidential hurdle given other evidence that the FE Analytics model would have been followed.

Loss of investment opportunity

I have reviewed Mr M’s comments and other evidence in the case, including the DOAR, the Administration Agreement and Mr M’s original time-line of events.

I find that EP were appointed as independent trustee of the Scheme in April 2019. Prior to that date I do not see that EP could be responsible for any act or omission related to the Scheme’s investments.

Mr M signed the DCD Termination Letter in January 2019 and viewed this as a reason why the Member-Trustees could not agree and execute investment decisions with DCD. He was of the view he had to wait until EP’s appointment had been concluded.

However, the Member-Trustees could have acted on the August 2018 Portfolio Proposal in the five months prior to Mr M’s completion of the draft of the DCD Termination Letter. Until its replacement by EP in April 2019, DCD remained the independent trustee of the Scheme and, together with the Member-Trustees, was empowered to take any investment decisions and implement them. It also operated the Scheme bank account. The Member-Trustees apparently did not implement the August 2018 Portfolio Proposal between August 2018 and April 2019 on the basis that this could have created delays and additional fees. While this was a legitimate rationale, it was not one for which EP can be held responsible: EP was not at the time a trustee of the Scheme or responsible for the administration of Scheme investments or the Scheme bank account.

12 CAS-65731-T5X2 Between April and June 2019, EP and DCD resolved HMRC registration matters for the Scheme. Between June and November 2019, amongst other matters, EP and the Member-Trustees worked to open a trustee bank account with Metro Bank. Scheme funds were finally transferred from the DCD account to the new Metro Bank account on 11 December 2019. On 14 January 2020, it is confirmed that the transfer is fully completed and EP have all the necessary paperwork and associations to fully administer the Scheme. In January 2020, the Member-Trustees instructed EP to open an investment account for the Scheme with Bestinvest and, in February 2020, approximately £25,000 was invested in line with the August 2018 Portfolio Proposal with the balance being invested lower-risk investments, having regard to Covid- related stock-market volatility at that time, until they were reinvested in line with the August 2018 Portfolio Proposal in August 2020.

Even on Mr M’s account, at no point until January 2020 did the Member-Trustees give instructions or request investment of the funds held in the Scheme, whether held in the bank account operated by DCD until December 2019 or in the Metro Bank account operated by EP from December 2019. I appreciate that the Member- Trustees may have considered that it was not practical or efficient to direct or execute investments while the funds were held in an account operated by DCD or to open an interim brokerage account, but I cannot find that EP delayed any decision or implementation in respect of investments prior to January 2020 when the instructions were first given to them.

I also appreciate that the FE Analytics Model portfolio may have been shared with EP at the outset and before it became a trustee or administrator of the Scheme, but that could not be treated as the giving of an investment instruction or a request to EP as independent trustee to consider an investment proposal.

While there is evidence of the investment enquiries the Member-Trustees had made to inform any investment decisions, there is no evidence of a definitive decision having been made or such a decision having been communicated to either the outgoing or incoming independent trustee for agreement. The absence of evidence of reasons to do otherwise is not sufficient. Decisions of the trustees of the Scheme needed to be unanimous between all of the trustees to have effect. So, even if a decision had been made by the Member-Trustees, it would have had no effect until also agreed by the appropriate independent trustee.

I find that there is no evidence that the Member-Trustees made a definitive investment decision, that they sought to establish which of the independent trustees, if not both, was the appropriate party to agree to the investment, or that they informed either of the independent trustees that a decision had been made and required their agreement. So, no actionable investment instruction existed.

I acknowledge that the FE Analytics Model portfolio and the February 2020 emails might provide good evidence as to what Mr M’s instructions would have been had he given any in the period between April 2019 and February 2020, but that is not sufficient for me to find that EP were responsible for such losses. 13 CAS-65731-T5X2 EP has acknowledged administrative failings in the process for transferring the administration and trustee functions to itself, including opening a new bank account in the names of all trustees, and I agree. However, I cannot find that such administrative failings give rise to a liability for the failure to invest the Scheme funds between April and December 2019. Their administrative failings did not prevent the investment of Scheme funds or indeed the giving of investment instructions. As the bank account operated by DCD remained a trustee bank account, DCD could have been instructed to make such payments from the trustee bank account as the trustees, including EP and the Member-Trustees, directed. While the Member- Trustees may have decided not to give investment instructions pending the transfer of funds to the Metro Bank account, I have seen no evidence that the decision they made was necessary and unavoidable.

I understand Mr M’s further comments are to the effect that the decision not to implement the FE Analytics Model portfolio before the transfer of trusteeship and administration to EP was based on EP’s February 2019 indication that the transfer would complete “by April 2019”. In response to the Adjudicator’s Opinion, Mr M acknowledged that the Member-Trustees could, for example, have asked DCD to open an interim account to execute investments, but in their decision not to do so, relied on EP’s indication of April 2019 for completion of the Take-over Process. It is clear that this date was not a promise or guarantee. It was aspirational and, read in the context of the process guidance provided by EP, listed in paragraph 12 above, it would not have been reasonable for the Member-Trustees to rely on it to defer investment if there were an element of urgency. To find EP responsible for Mr M’s loss of investment opportunity on the basis of the February 2019 indication, I would need to find that it was an unequivocal statement intended to be relied on by Mr M in deciding whether to complete the transfer process before implementing investment changes and that Mr M then reasonably relied on it in delaying investment until February 2020. I find that it was not an unequivocal statement intended to be relied on in that way.

Mr M restated in his further comments his submission in relation to the High Court’s ruling in Tenconi v James Hay Partnership [2019] 6 WLUK 162 (the Tenconi case). In this regard, it is essential to understand the background to the Tenconi Case, which was a transfer between two different pension schemes, following the removal of an investment option from the ceding pension scheme. The applicant consequently sought to transfer to a new pension scheme to have access to the investment options he required. There was a specific notified date, the day of the Brexit referendum, on which he anticipated a fall in investment markets and on which he intended to execute his intended investment strategy. As the pension assets had to be physically transferred from the ceding scheme’s ownership to the ownership of the receiving scheme, there was a period of transition during which it was not possible for investment instructions to be executed by either the outgoing or succeeding trustees. The appeal to the High Court was on the foreseeability and recoverability of the loss.

14 CAS-65731-T5X2 In Mr M’s case, the Member-Trustees appointed a new independent trustee and administrator but there was no such physical transfer of pension scheme assets. All of the pension scheme assets remained within the same pension scheme, and were available for investment in accordance the Rules, which also remained unchanged.

Mr M makes the point that the same principles should apply. The same principles on foreseeability and recoverability of loss should indeed apply. However, I cannot find that in establishing new trustee and administration arrangements and a new bank account and liaising with various parties over time in respect of such matters, however inefficiently, EP breached any duty in relation to the investment of the Scheme assets because no instructions were given in relation to investments and there is no evidence that investment of the Scheme assets was effectively prevented during the Take-over Process or otherwise by any failings on the part of EP. I would also need to find that protecting Mr M from any delay in investing the assets of the Scheme during the Take-over Process was part of EP’s duty in carrying out the Take- over Process with due skill and care. This was not an issue considered by the High Court in the Tenconi case and would need consideration on the facts. I make no finding on that point since I find that the investment of the Scheme assets during the Take-over Process was not effectively prevented. Instead, the Member-Trustees decided independently that implementing the August 2018 Portfolio Proposal during the Take-over Process would create delay and additional fees and therefore chose not to give investment instructions.

I do not uphold this part of Mr M’s complaint. Consequently, it is not necessary for me to comment on Mr M’s calculations of financial redress for loss of investment opportunity.

Maladministration

EP has not disputed the Adjudicator’s Opinion that it was responsible for a catalogue of errors that amounted to maladministration. So, I have restricted my comments regarding maladministration to the points where Mr M has raised disagreement in his response to the Opinion.

EP accepted the administrative failings listed in paragraph 32, above, and said it had apologised for them at a meeting of the trustees on 6 August 2020. Mr M has said he has no record of any such apology. Mr M was party to the meeting as a Member- Trustee, so it would have been prudent for him to have kept minutes of the meeting or to have obtained a copy of, and approved, any minutes that may have been kept by EP. I do not consider that it is necessary for me to make a finding in this regard. Simply, if EP did not provide a copy of the minutes of the 6 August 2020 meeting to the Member-Trustees, it would be good practice to do so now. If the minutes are silent on the nature of the apology given, it would be prudent for EP to take this opportunity to put its formal apology to Mr M in writing.

In paragraph 32.17 above, the Adjudicator questioned whether it was ever necessary to establish the New Bank Account in the circumstances. I acknowledge that EP has

15 CAS-65731-T5X2 addressed this in its list of learning points compiled as a result of Mr M’s complaint. Mr M has now also questioned if EP received “any payment, interest share, referral fee or non-cash benefit (directly or via an affiliate) arose in relation to Metro during the takeover and to disclose its conflicts policy/register entries covering banking relationships at the time”. I do not consider these matters to be part of Mr M’s original complaint to me, so it does not fall within my jurisdiction to investigate them now. If Mr M wishes to pursue them, he should raise them directly with EP.

EP, having accepted that its errors amounted to maladministration, refunded fees to the sum of £2,100 to the Scheme. Mr M remains of the view that this remedy is not proportionate to the Scheme’s alleged loss of investment opportunity. As I have found that Mr M’s complaint about the loss of investment opportunity should not be upheld, the award should be viewed only in the context of what I might award in relation to non-financial injustice.

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 M has experienced falls into the serious category, for which an award of £1,000 would be appropriate. As the award from EP of £2,100 in this case exceeded the amount I would have been minded to award, the part of Mr M’s complaint that relates to EP’s maladministration is not upheld.

Summary

I do not uphold Mr M’s complaint.

Camilla Barry

Deputy Pensions Ombudsman 3 February 2026

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