The Pensions Ombudsman (TPO) has ordered the trustees of the Henry Davison Limited Pension Scheme to repay £2.5m of mismanaged funds back into the scheme.

It found that the trustees “committed multiple breaches of trust” and made decisions that amounted to “pure maladministration”.

The original complaint was lodged by Mr L, who was joined by 13 ‘additional applicants’ that had also been affected by the lost pension funds.

The complaint was that the trustees had misrepresented the scheme, mismanaged the funds, issued fabricated benefit statements and that the funds that had been transferred into the scheme had been lost.

The trustees of the scheme, Tony and Penny Davison, signed an asset management agreement (AMA) with investment management company Tivan, without seeking independent financial advice.

They had also used prime brokers, RJ O’Brien and Saxo, which did not have permission from the Financial Conduct Authority to manage investments.

Up to December 2012, a total of £1.33m was placed with Tivan, but by February 2015 this had become approximately £106,000, a loss of £1.22m, including £740,000 “in commission to Tivan”.

The AMA with Tivan did not contain confirmation of the commission rates or performance fees, both were marked as ‘TBA’, and Mr Davison failed to produce records of the costs and charges as they had been “destroyed when the family home was flooded”.

Tivan went into liquidation in 2016.

After terminating their accounts with the prime brokers, the scheme trustees subsequently entered loans worth £798,000 with several companies, which were never disclosed to the scheme’s members, all of which defaulted and none have been repaid.

The trustees had also invested £173,500 in Kirkpatrick Fiscal Limited, which was owned by Mr Davison, and £114,800 was paid into another of his company’s, Henry Davison Associated Limited.

Throughout the management of the scheme, the trustees did not seek independent financial advice as Mr Davison claimed that he believed he had suitable experience and knowledge to run the scheme effectively.

Although he had some investment experience, he told the scheme’s members that he had “substantially more” experience than he actually did.

TPO ruled that, within 28 days of the determination, the trustees must pay approximately £2.5m into the scheme, consisting £1.3m in relation to the agreements with Tivan and the prime brokers, £800,000 in relation to the loans, £173,500 for the Kirkpatrick Fiscal Limited investment and £114,800 regarding the Henry Davison Associated investment, plus 8 per cent interest.

In its determination, TPO stated: “The trustees have committed multiple breaches of trust. Their actions also amount to pure maladministration. For example, there was a failure to produce statements and a lack of attention in respect of the fees, charges and commission structure.

“The trustees acted incompetently in assessing and addressing various conflicts points. Lengthy proceedings were necessary in order to investigate and determine Mr L’s and the additional applicants’ cases.

“During the oral hearing it was apparent that the scheme was administered almost entirely without established process or procedure.

“Accordingly, within 28 days of the date of this determination, the trustees shall pay the sum of £5,000 to each of Mr L, and the additional applicants, in recognition of the exceptional level of distress and inconvenience suffered by each of them over a prolonged period of time.”

TPO will also pass a copy of the determination onto The Pensions Regulator so that it can consider whether to appoint an independent trustee to the scheme.

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