David Whitehead Sons Limited Small Self Administered Scheme Cas 35438 · CAS-35438-M6P6

CAS-35438-M6P6

Ombudsman’s Determination Applicant: Mr L

Scheme: David Whitehead & Sons Limited Small Self-Administered Scheme (the SSAS)

Respondents: Rowanmoor Executive Pensions Limited and Rowanmoor Trustees Limited (Rowanmoor)

Complaint Summary Mr L has complained that Rowanmoor has failed to correctly distribute the SSAS funds on the death of his fellow trustee/member, Mr Y. In particular, he has complained that action by Rowanmoor has compromised a determination made by an independent expert engaged under the SSAS’ trust deed and rules.

Summary of the Ombudsman's Determination and reasons The complaint is not upheld against Rowanmoor because there are no grounds on which to set aside the determination made by

Detailed Determination Material facts

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“The members’ entitlement to benefits are determined by the contributions made to the Scheme on their behalf and the investment income earned on these contributions, but are subject to the maximum benefits allowable under Inland Revenue regulations.”

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The 2003 Valuation Report noted that the purpose of the valuation was to check that the intended contributions to the SSAS and the resulting benefits were within Inland Revenue limits. It recorded total employer contributions in each of the years ending September 2000, 2001, and 2002 at £20,000. The total member contributions in each of these years was £2,954. The 2003 Valuation Report concluded:

“The maximum contributions permitted by the Inland Revenue for the current triennium are set out below:

Annual contribution [Mr L] [Mr Y]

expressed as a percentage 41.3% 58.3%

of each year’s remuneration

in the first year of the triennium £16,070 £19,080

based on current remuneration

These contributions are the maximum contributions for the member to all schemes of the Employer.

I confirm that the current level of the members’ contributions being paid towards the scheme is within Inland Revenue limits.

Contributions can be paid at a lower level but not at a higher level than those shown. In particular it should be noted that if remuneration fluctuates, the maximum payable is the fixed percentage of that variable remuneration.”

1 The actuary had assumed continuous service and continued rights for the purposes of the valuation.

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“The last report was prepared as at 13 September 1999 and there have been no major changes, however, it would appear the assets have been split incorrectly in the last report. Therefore, I have re-visited the split since we took over this scheme.

Also, the IFA confirmed the [Company] was part of the Lonrho Textile Group that was sold out in 1996. For the purposes of the calculations I will assume that the members are entitled to continuous service and continued rights.

Also, the GMP value was incorrectly calculated in the report …”

“During the lifetime of the SSAS, we have assumed that the employer contributions to the scheme would be split pro rata to the employee contributions … thus giving the following split for the year to September 2004, and any previous years as:

[Mr L] £10,959

[Mr Y] £9,041

The member contributions are genuine contributions to the SSAS by [Mr L] and myself, which are represented by deductions each month from our respective salaries and paid into the SSAS bank account …”

2 Then James Hay Pension Trustees Ltd.

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“… subject to the legal point of whether an agreement made in a conversation between the directors counts as a company decision, we believe that the more credible split is the 54.80% to [Mr L] / 45.20% to [Mr Y] split.”

5 CAS-35438-M6P6 Mr L’s position

3 Mr L contacted Cartwright himself. In an email dated 23 October 2020, Cartwright said: “We have again

retrieved our files from archives, and I hope that the following information is helpful: 1. [Cartwright] ceased to be Pensioneer Trustee on 19 June 1998 when it was replaced as Pensioneer Trustee by Scottish Mutual Assurance Plc. 2. We have checked our files, we have no record of any advised allocation of contributions between the scheme members. We would only have needed this for a triennial actuarial valuation, and none were undertaken while we were the Pensioneer Trustee. 3. As the Scheme commenced in 1996, triennial actuarial valuations would have been due in 1999 and 2002. Whoever undertook these actuarial valuations would need to have been advised of the split of the contributions paid between the scheme members. You may therefore wish to contact the Actuary responsible for these valuations to see if they have retained this information on their files.” 4 Mr L contacted this company and, in an email dated 22 November 2020, it said: “despite a thorough search

of our archives, we have no records relating to the allocation of contributions under the [SSAS] for the periods September 1998 – 2003.” 5 Mr L contacted Mr N and, in an email dated 23 November 2020, Mr N said: “Following our conversation, I

am writing to confirm that we do not hold any information in relation to the [SSAS].” 6 CAS-35438-M6P6

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6 Mr L has said that the letter of 20 January 2006 is date stamped received 23 January 2006. This is not

visible on our copies. 7 CN wrote to Mr Q, on 19 May 2006, saying she had telephoned Mr Y that day to confirm that the Company

held the pension fund cheque book and to request that a cheque be drawn for his TFCS. CN said Mr Y would speak to Mr Q on 22 May 2006 with regard to this. 8 CAS-35438-M6P6

Rowanmoor’s position

“Except as provided for expressly in the Definitive Deed the Trustees shall have full power to determine conclusively any questions or matters of doubt concerning the Scheme or the construction of the Definitive Deed … Such determination shall be binding on all interested parties.”

8 In correspondence with Mr Y’s solicitors, Rowanmoor’s solicitors cited: Owen Pell Ltd v Bindi (London) Ltd

[2008] EWHC 1420 (TCC); British Shipbuilders v VSEL Consortium plc [1997] 1 Lloyd’s Rep 106; National Grid Co plc v M25 Group Ltd [1999] 1 EGLR 65 CA; Campbell v Edwards [1976] 1 WLR 403 CA; Alfred C Toepfer v Continental Grain Co [1974] 1 Lloyd’s Rep 11 CA; Jones v Sherwood Computer Services plc [1992] 1 WLR 277 CA; Nikko Hotels (UK) Ltd v MEPC Plc [1991] 2 EGLR 103 9 CAS-35438-M6P6

Conclusions

“… subject to the legal point of whether an agreement made in a conversation between the directors counts as a company decision, we believe that the more credible split is the 54.80% to [Mr L] / 45.20% to [Mr Y] split.”

“5.1 The Employers shall make such contributions to the Scheme as the Principal Employer may from time to time agree with the Trustees. ...” (Emphasis added)

“5.2 An Employer may at any time pay additional contributions to the Trustees provided that this does not prejudice Registration and the Trustees are satisfied that this will not result in the Scheme being treated as having made an Unauthorised Payment …” (Emphasis added)

10 CAS-35438-M6P6 “… the monies, assets, property and investments held for by or on behalf of the Trustees on the trusts of and for the purposes of the Scheme and which from time to time constitute the fund of the Scheme. It includes (but is not limited to) contributions from Employers and Members …”

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9 Nikko Hotels (UK) Ltd 10 Bindi

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Anthony Arter Pensions Ombudsman

20 January 2022

14 CAS-35438-M6P6 Appendix 1 Trust Deed and Rule of the SSAS

“Decisions at Trustee meetings (or sub-committee meetings) must be unanimous. If the Trustees cannot reach a unanimous decision on any matter (excluding decisions relating to the termination or winding up of the Scheme) the matter shall be referred to an expert unanimously appointed by the Trustees whose determination shall be binding on the Trustees …”

“16.1 The Fund shall be vested in the Trustees as joint tenants and held by them upon irrevocable trusts in accordance with the terms of the Definitive Deed.

16.2 All monies, assets, investments and property received by the Trustees for the purposes of the Scheme shall form part of the Fund …”

“… the monies, assets, property and investments held for by or on behalf of the Trustees on the trusts of and for the purposes of the Scheme and which from time to time constitute the fund of the Scheme. It includes (but is not limited to) contributions from Employers and Members, assets accepted or acquired by the Trustees for the Scheme and any resulting investment gains, returns or interest. This expression includes where appropriate any part of the Fund.”

“32.1 Except as provided for expressly in the Definitive Deed the Trustees shall have full power to determine conclusively any questions or matters of doubt concerning the Scheme or the construction of the Definitive Deed …

32.2 Such determination shall be binding on all interested parties.”

“5.1 The Employers shall make such contributions to the Scheme as the Principal Employer may from time to time agree with the Trustees. The Employers shall contribute only such sums as relate exclusively to the benefits to be provided in respect of employment with that Employer.

5.2 An Employer may at any time pay additional contributions to the Trustees provided that this does not prejudice Registration and the Trustees are satisfied that this will not result in the Scheme being

15 CAS-35438-M6P6 treated as having made an Unauthorised Payment. Such contributions may be made either for the general purposes of the Scheme or for one or more of the specific purposes referred to in this Definitive Deed …”

“At any time from a Member attaining Normal Minimum Pension Age … the Trustees may apply all or such part as they may determine of a Member’s Accumulated Credit towards the provision of a Scheme Pension or the purchase of a Lifetime Annuity.”

“… in relation to any Member … that part of the Fund which is determined by the Trustees subject to the following provisions of this definition as relating to the relevant Person at that time, having regard to:

(a) the contributions paid into the Scheme on behalf of the Person by the Employers and … by the Person;

(b) any transfer amounts paid into the Scheme on behalf of the Person;

(c) the income and capital position of the Fund (after allowing for expenses and other deductions); and

(d) any other matters which the Trustees consider appropriate.

Nothing in this definition shall confer on any person any right to any specific assets of the Fund which may be allotted to him on a notional basis for the sole purpose of determining the value of his Accumulated Credit from time to time. The Trustees may … have regard to the advice of an Actuary …

The Trustees shall in exercising their powers to determine the Accumulated Credit in respect of a Person exercise them in such manner that they are satisfied that their determination will not result in an Unauthorised Payment, or in an Unauthorised Payment being treated as having been made …”

“In respect of benefits expressed to be payable in accordance with this Rule (“Death Benefit”):

(a) any Death Benefit shall be held separately from the rest of the Fund on discretionary trusts to be distributed on such terms and in such shares as the Trustees decide to or for the benefit of any of the deceased’s Death Benefit Beneficiaries …

(b) all Death Benefits shall be distributed within two years of the date of death of the deceased. If all or part of a Death Benefit remains unpaid at the end of

16 CAS-35438-M6P6 two years from the date of death it shall be retained for the general purposes of the Scheme …”

17 CAS-35438-M6P6 Appendix 2 Robert Graham & Co Report

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Findings

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23 CAS-35438-M6P6 Appendix 3 Details of salary and dividend payments

Benefits paid to Mr Y between April 2006 and April 2011

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