PART 4 – Norton Motorcyles – TPR revving into action once again

23 / 09 / 2021

You may recall the article published by my colleagues Clive and Paul in Pensions Age in April 2020:  Guest comment: Norton Motorcycles – Pensioners taken for a complete ride – Pensions Age Magazine where they discussed the case of Stuart Garner and his failings as a trustee when during 2012 and 2013, he invested, the entirety of the three defined contribution schemes’ assets in preference shares in his company, Norton Motorcycles shares.

Two of his associates, involved in setting up the Norton pensions schemes, Andrew Meeson and Peter Bradley, were both convicted of tax fraud in 2013 following attempts to reclaim £5m of tax rebates from fictitious pension contributions.

Court documents from that trial show that £990,000 of the fraud proceeds were loaned to Garner to assist his acquisition of Norton in 2008.  Garner denies wrongdoing and has said he considers himself a victim because he did not know he was dealing with fraudsters.

Garner was the sole trustee of the three schemes in question, which cumulatively had 227 members.  He also had a controlling interest in Norton Motorcycles, in respect of which he was also a director and a CEO.

The Regulator’s investigation into Garner was triggered by a number of members reporting, in 2018, that they couldn’t obtain their pension benefits.

Clive and Paul’s article (mentioned in the first sentence of this article) helped to highlight the potentially unsatisfactory outcome of this case (in the event that Garner has insufficient personal assets to reimburse the members for their losses).

A group of members escalated their complaints against Garner to the Pensions Ombudsman.  In June 2020 the Pensions Ombudsman ruled that Garner had acted dishonestly and ordered him to pay c.£14 million back into the three schemes.  He was refused permission to appeal against the ruling, although he was granted permission to appeal against a further £180,000 in distress payments to 30 of the scheme’s 228 members, to whom he had repeatedly failed to return funds when they were due.  It is worth noting that, at the time of that ruling, Garner was already the subject of a personal bankruptcy petition filed by Leicester city council. 

Following the Pension Ombudsman’s ruling, and potentially minded to the fact that Garner’s financial affairs were in tatters and the money would probably never be returned to those schemes, the chairman of the House of Commons Work and Pensions Committee, the Rt Hon Stephen Timms MP, said at the time that the ruling ‘raises serious questions about the effectiveness of the regulators involved’.  Stephen Timms then wrote to the Pensions Regulator, asking what work the Regulator would carry out following the Ombudsman’s decision.

The Pensions Regulator has now announced its intention to prosecute Garner – two years after the Regulator commenced its investigation and 9 years after the investments were made.  The prosecution stems from the fact that it is, subject to certain exceptions, a criminal offence to invest more than five per cent of the current market value of scheme resources in Employer Related Investments (“ERI”) , as set out in Regulation 12(2) of the Occupational Pension Schemes (Investment) Regulations 2005.

Mr Garner has been summoned to appear at Derby Magistrates’ Court on 15 November charged with three separate ERI offences under section 40(5) of the Pensions Act 1995 – one in relation to each scheme.

Perhaps, in light of its anticipated improved powers under the Pensions Act 2021, the Regulator will be more proactive (and prompt) in dealing with similar cases in the future.  It is certainly being granted bigger teeth – but will they start to bite more often? Only time will tell.