British Steel financial adviser and former managing director of Active Wealth UK Darren Reynolds advised a group of people from the Trinity Mirror pension scheme to transfer out of their defined benefit (DB) pensions.
Reynolds became well-known during the British Steel Pension Scheme saga, when his firm Active Wealth UK fell into liquidation after advising numerous steelworkers to transfer out of their DB pensions.
Reynolds, alongside Clive Howells, who worked for unregulated introducer Celtic Wealth Management, had told the steelworkers it was a "no brainer" to transfer, and asked them to fill in risk assessments purely to "keep the Financial Conduct Authority happy".
In the case of the Trinity Mirror scheme members, Professional Pensions' sister publication, Professional Adviser, understands between 30 and 35 people, with pension transfer values averaging about £300,000, were advised by Reynolds to transfer out of their DB pensions and into the Greyfriars Portfolio Six fund. The fund included high-risk investments like The Resort Group - an unregulated overseas property investment - and mini-bonds.
The Trinity Mirror scheme members were transferred into the fund through self-invested personal pension (SIPP) provider Intelligent Money.
According to Echelon Wealthcare managing director Alastair Rush, who was heavily involved in assisting the British Steel workers gain compensation following their being advised to transfer out of their DB schemes, the Trinity Mirror scheme members were "worse off" than the steelworkers because "nearly all of their mini-bonds are illiquid".
Rush said the men were now working with Clarke Willmott solicitor Philippa Hann, who also worked with the steelworkers. She confirmed the firm was acting for "a number of people" who were transferred from the Trinity Mirror pension, adding she had "yet to see evidence of a single suitability letter provided to them".
In April, the Financial Services Compensation Scheme (FSCS) revealed it had received 34 complaints from former Active Wealth UK clients.
Lacks FSCS protection
The men involved either currently work, or used to work, at a Manchester-based printing press, and became clients of Reynolds through referrals from fellow Trinity Mirror employees. According to Rush, one of the men first realised something could be wrong with their pensions when a newspaper coming off the presses made reference to Reynolds' involvement in the British Steel saga.
As some of the investments within the Portfolio Six fund are unregulated, and therefore not subject to the same protections regulated products enjoy, such as FSCS-backing, Rush said he was unsure what would happen to the men's money.
"I think it's time for the SIPP companies to stand up and be counted," he said. "Why did it allow it? Why did it let those people go into mini-bonds? [SIPP companies] had just had a letter from the regulator about mini bonds.
"If we had decent SIPPs with decent guardians at the gate, we wouldn't have half of these problems, but they seem to resort to the 'reliance on others' rules, which say: ‘you can rely on another regulated entity.' We know it's failed, we've known for years [the rules] are nonsense, just because you can rely on someone, it doesn't mean you should."
'A web to hide his real motive'
Julian Penniston-Hill, CEO of Intelligent Money, the SIPP firm Reynolds used to transfer the assets, said: "An FCA authorised financial adviser transferred some clients into a SIPP with us. He proceeded to recommend the Novia platform within the SIPP. From within the Novia platform, he then accessed Greyfriars Asset Management and subsequently invested in P6."
With the benefit of hindsight, Penniston-Hill suggested it was obvious Reynolds was setting up a "complex web" to "try and create confusion and hide his real motive". "Why did he not use Greyfriars' own SIPP or Novia's free SIPP?" he added.
"However, all parties involved were authorised and regulated by the FCA to undertake the activities they did and all parties involved had signed our terms of business prohibiting investment into non-standard assets."
'We contacted the adviser'
Penniston-Hill continued: "Prior to the definition of bonds as a standard asset being changed to only apply to bonds held on a recognised stock exchange, we contacted the adviser and told him he would have to either move the clients into different investments or move the SIPPs to a provider who was happy to take non-standard assets."
The Intelligent Money CEO said Reynolds confirmed he would move the clients out of the investment but, several months later, had failed to do so. Penniston-Hill said the SIPP contacted him again to inform him it would be hit by a capital surcharge and so would levy a 1% one-off-fee to cover the costs incurred but he apparently failed to do so.
The CEO also said he believed Rush to be "quite disingenuous" in suggesting SIPP firms should behave as gatekeepers. He said Intelligent Money insisted a regulated adviser was in place for every SIPP it runs, and investments were limited to FCA-regulated investment firms.
"In doing this [suggesting SIPPs should be gatekeepers], Mr Rush is effectively stating that people cannot trust financial advisers and need protecting from them. I personally consider this to be a very reckless and irresponsible position to take.
"Perhaps he is confusing us with SIPP providers who have worked with unregulated introducers selling unregulated investments, something Intelligent Money has never once done."
Penniston-Hill added: "When it comes to his opinion that we should not 'resort' to relying on FCA rules, I am completely baffled."
Professional Adviser has been unable to find a point of contact for Darren Reynolds.
Nearly every trustee is confident of the next stage in their scheme’s strategy, despite almost an equal number being forced to consider replacing plans within the prior 12 months, according to research by Barnett Waddingham.
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Defined benefit (DB) schemes that provide GMPs must revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that have been calculated on an unequal basis, a landmark court judgment said last week.
Regulators must act now to impose some "proper regulation" to stop another defined benefit (DB) transfer advice disaster, saysTim Sargisson.
Opportunities for defined benefit (DB) schemes to pursue investment approaches that help repair the UK’s economy cannot stand in the way of improving member outcomes, Aegon says.