Fraud by abuse of position – former pension scheme trustees jailed for 10 years over £13m pension scam

Two former pension trustees, who persuaded 245 members of legitimate occupational pension schemes to transfer their pension savings into fraudulent schemes under their control, have been jailed for over 10 years. The pension liberation fraud occurred between 2012 and 2014, with a total value of £13.7m.

How did the fraud work? 

The fraudsters, Alan Barratt and Susan Dalton, who formed part of a larger criminal enterprise, were based in a call centre in Spain, offering free pension reviews. Along with other agents, they told victims that their current pensions were underperforming and that they could improve their retirement savings by transferring their pension pots to a new scheme. The agents claimed that the investments would be safe and in addition offered a tax-free cash bonus on completion of the transfer. 

The promises were false as once the pension savings had been transferred most of the money was passed to the mastermind of the criminal operation David Austin. The money was then funnelled offshore and used to fund his businesses, pay others involved in the operation and to enrich Austin and his family. The few investments that were made were inappropriate and yielded either minimal or no return. Furthermore, the cash payments received by the victims as a rebate or bonus were simply taken from their own pensions, thereby exposing them to punitive tax charges for accessing their pensions before the age of 55. 

The civil case

TPR appointed independent trustees to review the scheme, at which point it became clear that the pension funds were gone and would not be reinstated for scheme members. In 2018 a civil trial was brought by TPR against Barratt and Dalton (amongst others). In the High Court, they were ordered to repay around £7.7m and £5.9m respectively. 

After the civil trial, TPR began a criminal investigation, which included allegations against Austin. However, Austin died by suicide in 2019 before the investigation was complete.  

The criminal case

Following the criminal investigation, a prosecution was brought by TPR against Barratt and Dalton. The pair admitted charges of fraud by abuse of position, arising from their roles as pension trustees. As well as facilitating the fraud, they personally received substantial commission and the court heard that they had received payments of £250,416.49 and £126,624.69 respectively. Barratt was sentenced to five years and seven months and Dalton to four years and eight months. Following a request from TPR, they were both also banned from acting as company directors for eight years.

Conclusion

This scam demonstrates a clear abuse of the role of a pension trustee and the devastating impact that this can have on the affected individuals, who have now lost the financial security of pension funds they had built up over many years. It is hoped that TPR’s decision to prosecute, along with the custodial sentences handed down in this case, will serve as a sufficient deterrent to dissuade others from carrying out pension scams in the future.