The independent trustee to a group of pension schemes that promise people early access to their retirement savings has won a freezing injunction against the promoters of the schemes, into which as much as £25m in savings may have been transferred.
The Pensions Regulator and the Financial Services Authority have issued warnings in recent weeks about schemes that appear to offer the ability to extract cash quickly from pensions savings that those under the age of 55 could not otherwise tap without incurring heavy tax penalties.
They fear people may be induced to part with savings that would have allowed them a minimum level of comfort in old age.
The injunction comes just over a month after the Pensions Regulator made an emergency appointment of Dalriada Trustees, the independent trustee, after concerns were raised about schemes run by Ark Commercial Retirement Planning.
According to court documents, the companies were running what was described as a “pensions reciprocation plan”, with 5 per cent of proceeds payable to the organisers.
Fresh concerns over such schemes have emerged as traditional forms of credit such as mortgage equity withdrawal and generous lines of credit have been halted by risk-conscious lenders since the financial crisis.
Daniel Freedman, Ark’s legal adviser, said that almost all of its roughly 450 clients were those who need cash and have no other access to it. “This money enables them to clear a loan or save a business or get out of mortgage arrears,” he said, adding that his clients believed they had broken no laws.
Ark had not contested the freezing order but reserved its right to do so, Mr Freedman said. He said that UK tax authorities were aware of the scheme and had taken no action against it.
Mr Freedman noted that none of the members of the scheme had objected to its terms.
The regulator’s appointment of Dalriada came after managers at several large UK corporate schemes raised questions about what appeared to be unusual requests for lump sum transfers to schemes run by Ark-related companies.
According to a transcript of the hearing in the Chancery Division of the High Court on June 17, clients of Ark are allowed to withdraw sums equal to up to 50 per cent of what was transferred in the form of a loan. The remainder is intended to be invested.
Arguing for Dalriada, Andrew Spink QC asked that all the assets of the schemes be frozen because what remains shows “a risk of dissipation”. In particular, assets had been diverted to “dubious assets in foreign jurisdictions”.
Among these are a £4m investment “in shares in a Cypriot company that allegedly owns a plot of land, which allegedly has planning permission for holiday apartments”.
Moreover, Dalriada is challenging the legality of the scheme design itself. Pension rules do not permit payments from one person’s pension to another unless it is a surviving spouse or dependant.
But under the scheme as designed, sums are not withdrawn from the unit into which the member’s funds have been transferred but rather from another scheme to which a different member has made a payment, with a balancing payment in return.