Pension loan investigation branded a 'nightmare’ for investors

The fallout from the Pensions Regulator’s (TPR) attack on pension reciprocation plans (PLPs) will be a “nightmare” for people invested in them, a lawyer says.

In June, TPR appointed Dalriada Trustees to seize control of six pension reciprocation schemes being run by Ark Business Consulting and two other closely linked companies.

A lawyer at McGrigors, the firm acting for Dalriada, said whatever the outcome of the court case surrounding the schemes, investors will suffer large losses.

PLPs are arrangements where investors put money into one scheme and take a loan of the same value from a parallel scheme, effectively giving them access to their pension before the age of 55.

The Financial Services Authority (FSA) issued a warning about the schemes in June.

By early December the High Court must determine whether the PRPs are valid schemes or not, Katherine Davies, a partner in the litigation and dispute resolution team at McGrigors, said.

If the schemes are void, any money loaned out to investors must be paid back in, she explained.

However, even if the schemes are found to be legitimate, the 400 members of the schemes may face hefty tax charges from HMRC on money withdrawn from their schemes in a "nightmare" situation, Davies said.

"Quite a lot of people who transferred into these schemes were desperate to release their money," she said.

Davies added the firm is also investigating whether the investments members had put their money in were suitable for pensions.

She said these appeared to be highly illiquid such as options on overseas land.