This report outlines how we successfully brought criminal proceedings against a trustee, Stephen Smith, and regulatory proceedings against a second trustee Marcus Worthington. They played a key role in the making of illegal loans and a further investment from a company pension scheme’s funds to persons connected to the employer, Marcus Worthington and Company Ltd.
Ultimately, all scheme funds were lost because the loans in this case were converted into a failed investment.
Mr Smith, a former trustee and finance director of the company, received a 10-month suspended prison sentence, 150 hours of community service and was ordered to pay £1,000 in prosecution costs.
Mr Worthington, the subject of a TPR regulatory proceedings case, was fined £29,000 under section 10 of the Pensions Act 1995.
We then appointed an independent trustee to the scheme on an exclusive basis.
Published: 14 August 2025
Key points at a glance
- We expect all trustees to have good technical knowledge and understanding. Where this is not the case, we will act in members’ interests.
- In this case, we investigated and took action against two trustees after receiving a breach of law report about employer-related investments (ERI).
- Trustees who breach ERI rules are guilty of a criminal offence.
- ERI restrictions are crucial in ensuring the security of scheme funds and protecting savers’ interests. We are committed to taking swift and decisive action when these restrictions are breached.
- Our employer related investments guidance sets out the restrictions on using pension scheme funds for ERI and the risk of criminal prosecution.
Scheme information
The Worthington Employee Pension Top Up Scheme was established by the scheme’s sponsoring employer, Marcus Worthington and Company Ltd (MWCL), for long-serving employees, to top up other pension benefits members had accrued.
MWCL entered administration in September 2019 and was dissolved in January 2022. The company was involved in construction, civil engineering work, and property development. As of 31 March 2018, the scheme had 57 deferred members.
Background
In December 2019, we received a breach of law report from the appointed insolvency practitioner about suspected employer-related investments (ERI) by the scheme’s trustees. The report highlighted that, between 2009 and 2016, the trustees loaned funds and later invested £700,000 (99% of the scheme’s assets) to businesses and a trust connected to the employer.
Through our investigation, we established that the loans were converted into a beneficial share of a real estate investment – a retail park where the land concerned had been let on a long lease to companies connected and associated with MWCL. However, subsequent trading and cash flow problems resulted in the insolvency of the employer, its parent company and the companies that held the long lease.
Enforcement action
After we’d received the breach of law report, we investigated the alleged loans and whether they had breached ERI rules under section 40 of the Pensions Act 1995 and the Occupational Pension Schemes (Investment) Regulations 2005.
Loans to a person connected or associated with the scheme employer are strictly prohibited. Investments of more than 5% of the value of scheme resources in land occupied or used by, or subject to a lease in favour of, a person connected or associated with the scheme employer are also prohibited.
Breaching section 40 is a criminal offence and can potentially lead to an unlimited fine and/or imprisonment. Breaches can also be penalised through regulatory action (fines under section 10 of the Pensions Act 1995).
Our investigation uncovered illegal ERI loans by the scheme, including three totalling around £400,000 to Stonewell Property Company Limited, the parent company of MWCL. Both companies were part of the now-dissolved Marcus Worthington Group.
As well as investigating the trustees Mr Worthington, Mr Smith and Mr Boardman for the ERI breaches, we also investigated the professional adviser to the scheme, Mr Derek Thomas, on the basis that he encouraged and assisted the trustees with the prohibited loans.
Following the investigation, we initiated criminal proceedings against Mr Smith, Mr Boardman and Mr Thomas.
We also considered prosecuting Mr Worthington but after considering his personal circumstances and applying the public interest test of the Code for Crown Prosecutors, we took the view that the public interest test for prosecution was not met and instead opened a regulatory case against him for a penalty under section 10 of the Pensions Act 1995.
Scheme advisers, along with trustees, are responsible for ensuring compliance with ERI restrictions. If they fail to report breaches or are involved in decisions leading to illegal investments, they may face legal action as demonstrated in this case.
Outcome
On 19 October 2022, at Preston Magistrates’ Court, Mr Smith pleaded guilty to making five prohibited loans. He pleaded not guilty to a sixth charge of making a prohibited investment. The court heard that Mr Smith had played a central role in running the scheme, had failed to act in the best interests of its beneficiaries or with impartiality, and was negligent in his role as a trustee.
Alongside Mr Smith, Mr Boardman was charged with five prohibited loans and one prohibited investment and pleaded not guilty. Mr Thomas was charged with four counts of assisting or encouraging prohibited loans but did not appear in court or enter a plea. Mr Thomas passed away in July 2022 and proceedings against him were ended.
On 13 December 2023, at Burnley Crown Court, Mr Smith was given a 10-month prison sentence, suspended for 12 months, after admitting using scheme funds to make five prohibited loans to persons connected to the scheme’s employer. Mr Smith was also ordered to complete 150 hours of community service and pay £1,000 in prosecution costs. We re-reviewed the evidence against Mr Boardman and upon reapplication of both stages of the code for crown prosecutors decided that the case did not meet both stages of the test and decided not to proceed with the case against him. No evidence was offered against Mr Boardman and the court recorded not guilty verdicts in respect of all matters concerning him.
In relation to the regulatory proceedings, we followed the approach set out in our monetary penalties policy, which sets out how we will generally use our powers to impose fines. In our Warning Notice to Mr Worthington, we submitted that he should pay six penalties of £5,000 (the maximum amount allowed under the policy) for each of the six ERI breaches, totalling £30,000.
On 29 November 2022, our Determinations Panel reviewed the evidence and was satisfied that Mr Worthington knew about and agreed to each of the loans and the investment. The Panel agreed they were illegal investments, which were made to persons connected with the scheme’s employer. They determined that Mr Worthington should pay a total penalty of £29,000 – £4,000 for the first breach and £5,000 for each of the remaining breaches.
Ultimately, all scheme funds were lost because the loans were converted into a failed investment (although Mr Smith was not a trustee at the time of that investment).
After fining Mr Worthington and prosecuting Mr Smith, we prioritised appointing a new trustee to the scheme. This was necessary because the scheme’s employer was dissolved on 5 January 2022 and Mr Worthington, becoming the sole scheme trustee with exclusive responsibility in carrying out all trustee duties, had failed to carry out any trustee duties for several years. The last recorded trustee activity was completing and submitting a scheme return in March 2019.
Due to Mr Worthington’s inaction, the scheme had effectively lacked proper administration for several years. We therefore decided it was reasonable to appoint an independent trustee to the scheme on an exclusive basis, in line with section 8 of the Pensions Act 1995. Where certain criteria are met, the independent trustee may be able to pursue a claim with the Fraud Compensation Fund.
By appointing an independent trustee to the scheme, we aim to protect the victims of pension scheme fund misappropriation. As a regulator, we carry out criminal investigations and prosecutions to protect pension savers and deter future wrongdoing. We are committed to treating victims of crime fairly, with dignity and respect, following the standards in the Code of Practice for Victims of Crime.
Our ability to prosecute scheme advisers as well as trustees where the tests in the Code for Crown Prosecutors are met, shows the importance of rigorous compliance and due diligence from all parties involved in managing pension schemes, particularly how scheme funds are used.
Our approach
Our objectives include protecting members’ benefits and promoting the good administration of work-based pension schemes.
We are bold and effective in how we enforce. We clearly set out our expectations to the market and promote positive behaviours through our codes of practice and policies. Where those expectations are not met, we act decisively and take enforcement action where needed.
ERI restrictions are crucial in ensuring the security of scheme funds and protecting savers’ interests. We are committed to taking swift and decisive action when these restrictions are breached. Employers, trustees and scheme advisers should follow our ERI guidance, which sets out the restrictions on using pension scheme funds for ERI and the risk of criminal prosecution.
We use a range of enforcement methods to protect savers by reducing risk and preventing or mitigating harm.
Any enforcement action is proportionate to the risk and harm to the savers identified. In our scheme management enforcement policy, we set out the range of enforcement powers open to us and the factors we consider when deciding whether to take enforcement action.
In bringing the criminal and regulatory proceedings outlined above, we clearly set out that we expected a better level of technical knowledge and understanding from the scheme’s trustees, especially those with long-term roles like Mr Worthington.
Our actions show that we will also hold scheme advisers accountable if there is good evidence that they have encouraged or assisted a breach of ERI restrictions. This sends a clear message to the wider pension community that this type of behaviour is unacceptable.
Timeline of events
- 5 June 2006 – The Worthington Employee Pension Top Up Scheme is established
- 2009 to 2016 – Trustees make illegal loans
- September 2019 – The scheme’s employer, Marcus Worthington and Company Ltd, enters administration
- December 2019 – We receive a breach of law report from the insolvency practitioner
- 5 January 2022 – Marcus Worthington and Company Ltd dissolved
- 19 October 2022 – Mr Smith pleads guilty to making five prohibited loans
- 12 January 2023 – Mr Worthington is fined £29,000 by TPR’s Determinations Panel
- 4 January 2024 – Mr Smith is given a suspended 10-month prison sentence, ordered to complete 150 hours of community service, and asked to pay £1,000 in prosecution costs
- 28 February 2025 – We appointed an independent trustee to the scheme