The tale of woe begins in 2012 when Stuart Garner caused various pension schemes to be established.

The schemes were registered with HMRC and individuals were encouraged by certain "advisers" to make pension transfers to the schemes.

Garner was the sole trustee of the schemes. He invested the entirety of the pension funds in preference shares in Norton Motorcycles, a company in which he had a controlling interest and of which he was director and CEO.

In 2018 some scheme members found they could not obtain their pension benefits. They complained to The Pensions Ombudsman (TPO) who found against Garner and reported his conduct to The Pensions Regulator (TPR).

In May 2019 TPR removed Garner as trustee of the schemes and appointed a professional independent trustee in his place. TPR opened an investigation.

More individuals complained to TPO. In January 2020, TPO arranged for there to be an oral hearing in February 2020 which Garner failed to attend.

The pension schemes remained invested in Norton Motorcycles preference shares. The ultimate crash then occurred: Norton Motorcycles went into administration in February 2020.

The House of Commons Work and Pensions committee has asked TPR to explain why, given the schemes were established in 2012, it has taken TPR so long to get on his bike.

Past problems repeated?

Do you feel you have heard the story before? You would be right. Wind the clock back some 30 years to the 'Maxwell' case – Mr Maxwell invested his company's pension fund monies in his own company which subsequently became insolvent.

But hold on, have we not enacted legislation and created regulatory bodies to tackle the Maxwell problem? The answer is yes, but in light of Norton Motorcycles, these steps are clearly inadequate.

What legal duties has Garner breached?

According to TPO, these include failure to take investment advice as required under section 36, Pensions Act 1995, failure to diversify investments in accordance with the 1995 Act and breaching the employer-related investments regulations. On this basis, Garner has acted in breach of trust.

So will the pension scheme members get their benefits?

In the Adams case, TPO ordered the trustee to pay compensation of some £500,000 for breach of investment duties. Garner may find himself subject to many financial penalties but if he has no resources, the cupboard is bare for the pensioners.

Trust claim?

Where monies have gone astray and they are trust monies, then they retain that character. Whether the insolvency practitioner should meet a trust claim in priority to all other company creditors is a complex legal field and would need further exploration by the insolvency practitioner in specific circumstances.

Is compensation available under the Fraud Compensation Fund (FCF)?

Most occupational pension schemes are supported by the FCF. Any compensation would depend on an offence of dishonesty being committed. In TPO proceedings mentioned above, Garner maintained the investment in the preference shares was made in good faith and not in effect dishonestly. We wait to see in this case whether FCF compensation for pensioners would be feasible.

How can these problems be avoided in future?

Trust schemes could be required to have at least two trustees, or appoint an independent professional trustee in addition to the incumbent trustee. Whilst doubling trustees is not fool proof, permitting a single trustee is a recipe for disaster.

Secondly, regulatory interaction could be improved. For example, TPO could give far earlier warning to TPR and TPR could then be entitled to act immediately.

Thirdly, any individual, seeking to transfer his pension pot from one scheme to another, could be required to demonstrate an employment connection with the recipient scheme (there was no connection with the Garner schemes). The Pension Schemes Bill contains provisions requiring connection, but with parliament not sitting it is very uncertain when these provisions will come into force – ideal for scammers no doubt.

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