Introduction
The Pensions Ombudsman’s (TPO) recent determination in the case of Ecroignard Trustees Limited (ETL) and former director Ankur Vijaykumar Shroff highlights critical failings in pension fund management. This case, which involved the Genwick Retirement Benefit Scheme and the Uniway Systems Retirement Benefits Scheme, underscores the devastating consequences of poor governance, conflicts of interest and risky investment practices. Ecroignard Trustees were found to have breached their duties by investing members’ funds in high-risk, unregulated, illiquid investments/assets that were inappropriate and did not comply with the regulations governing pension scheme investments, ultimately leading to significant financial loss for scheme members.
This determination serves as a cautionary tale for trustees and firms managing pension schemes. It underscores the importance of robust governance, ethical investment practices and compliance with regulatory standards to protect members’ funds.
Lessons learned from the case
The TPO ruling brings several critical lessons to light. We have summarised our top three below:
Governance failures: Trustees failed to manage conflicts of interest and did not exercise due diligence in selecting appropriate investments.
Investment risks: High-risk, illiquid investments, coupled with a lack of transparency, led to member losses.
Neglect of member interests: Decisions prioritised external parties over members’ financial security.
These failures emphasise the need for trustees and fund managers to adopt a disciplined and transparent investment approach, prioritising member interests above all else.
Our firm’s robust investment approach
At HPW, we adhere to the highest standards of governance, investment diligence and ethical practice to safeguard pension scheme members’ interests. Here’s how we ensure success and compliance:
Governance and internal controls
Rigorous oversight: We employ robust internal controls, regular audits and a clear separation of duties to eliminate conflicts of interest.
Accountability: Our decision-making process is transparent, ensuring trustees are fully informed and empowered to act in members' best interests.
Diversified investment strategy
Balanced risk and return: We adopt a diversified approach, spreading investments across asset classes to minimise risk.
Focus on stability: Unlike the schemes in the TPO determination, we avoid speculative investments and prioritise long-term stability and meeting members’ objectives.
We assess the risks of schemes and mitigate or remove them as much as possible in the investment strategies.
For a given level of risk, we try to achieve the best expected level of return while considering environmental, social and governance issues.
Transparency and member interests
Clear communication: Members are kept informed about investment strategies, risks, and returns through regular updates. Regular updates are shared with our clients, including a detailed quarterly market review that features a macroeconomic analysis, a comprehensive market overview and key investment insights.
Member-centric decisions: Every investment decision is made with the members’ financial security as the top priority.
Compliance and ethical standards
Regulatory adherence: Our practices align with the Pensions Regulator’s Codes of Practice and the Data Protection Act 2018.
Ethical investment: We conduct thorough due diligence to ensure every investment meets stringent ethical standards.
Red flags and advice for trustees
To avoid the pitfalls highlighted by the TPO case, trustees should remain vigilant. Here are some key steps:
Conduct due diligence: Always assess the risks, governance, and transparency of proposed investments.
Seek expert advice: Consult regulated advisors with a proven track record.
Diversify portfolios: Avoid over-reliance on single or high-risk investments.
Beware of unclear structures: Steer clear of overly complex or offshore arrangements without clear accountability.
The importance of codes of practice
Codes of practice provide a framework for trustees to manage pension schemes responsibly. By integrating these into our governance framework, we ensure compliance and build trust. For example, HPW regularly reviews its practices against these codes to stay ahead of regulatory changes and best practices.
Conclusion
The TPO determination serves as a stark reminder of the responsibilities trustees bear in safeguarding members’ funds. At HPW, we are committed to ethical investment practices that prioritise members’ long-term financial security while adhering to the highest regulatory and ethical standards.
If you are seeking a trusted partner for pension scheme management, contact us to learn more about our approach to robust and ethical fund stewardship.