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Pension Trustee Pays Cost of Lack of Diligence

When an unauthorised payment of £100,000 was made by a pension scheme for which a chartered accountant was responsible, he found himself facing a £15,000 fine.

The accountant was the administrator for the pension scheme for the directors of a small company. The scheme, without his knowledge, made a £100,000 loan to the company, which then lent it to another company which was under the control of one of the directors.

When the accountant discovered the unauthorised loan, he took action and obtained the repayment of the loan – with interest – to the pension fund.

However, on discovering the unauthorised payment HM Revenue and Customs imposed a £40,000 charge on the pension fund and a £15,000 fine on the accountant.

The accountant argued that his fine was unfair. He was not a trustee of the pension scheme, merely its administrator. He also claimed that there was no risk to the fund as a result of the loan: there was no chance that it would not have been repaid.

However, the Tribunal ruled that the mere occurrence of the unauthorised payment was sufficient to justify his penalty. The fact that the fund was not at risk was irrelevant. The pension fund had made an unsecured loan without appropriate documentation. The accountant did not have sufficiently strong procedures in place to prevent this or to identify unauthorised payments from the scheme.

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If you are responsible for the administration of a pension scheme, it is essential to know your legal rights and responsibilities. Contact us for advice.
Although correct at the time of publication, the contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.