FD given suspended sentence over £700k banned loans

FD given suspended sentence over £700k banned loans

Jan 12, 2024

A former finance director and pension scheme trustee has been given suspended sentence after admitting using £700,000 from a pension scheme fund to make prohibited loans

Stephen Smith of Broughton-in-Furness, Cumbria, was a former trustee of the Worthington Employee Pension Top-Up Scheme (WEPTUS) and also finance director of Marcus Worthington and Company Ltd (MWC), based in Lancashire.

He was sentenced at Burnley Crown Court on Thursday following a prosecution by The Pensions Regulator (TPR). Judge Unsworth KC sentenced Smith to a 10-month jail term, suspended for 12 months, and he will have to complete 150 hours of unpaid work in the community and pay £1,000 in prosecution costs.

HHJ Unsworth said: ‘Any mismanagement of pension schemes has the potential to cause real harm to people, many of whom will have sought to rely on those investments to keep them in later life. Mismanagement of schemes undermines public trust in the pension system in general.’

Smith had pleaded guilty to making five prohibited loans totalling around £700,000 at an earlier court appearance.

The court heard Smith had played a central role in running the scheme but had failed to act in the best interests of its beneficiaries or with impartiality and was negligent in the performance of his trustee duties.

Ultimately all scheme monies were lost as the loans were converted into another employer-related investment which failed, although Smith was not a trustee at the time of the failed investment.

Worthington Employee Pension Top Up Scheme was a money purchase trust-based occupational scheme established in 2006. The scheme’s sponsoring employer was MWC, which entered administration in September 2019 and was dissolved in January 2022. The firm was engaged in construction and civil engineering work and property development. MCW’s parent company was Stonewell.

TPR’s investigation uncovered prohibited employer-related loans by the scheme, including three totalling around £400,000 to Stonewell Property Company Limited, the parent company of the scheme’s sponsoring employer, MWC.

Based in Lancashire both companies were part of the now-dissolved Marcus Worthington Group. Two other loans, totalling around £540,000, had been made from the scheme to Brockholes Pavilion Trust Fund – a trust-based occupational scheme established in 1986 for the benefit of Worthington family members. The loans were repaid, albeit erratically.

The Pension Regulator’s executive director of frontline regulation, Nicola Parish, said: ‘Rules restricting trustees from lending scheme money to a sponsoring employer are there to safeguard workers’ pension pots.

‘Smith chose to flout these rules and, as this prosecution shows, we will take tough action to punish those who risk the pension funds they are entrusted to look after.’