April 12, 2024

Pensions Ombudsman: member’s complaint of unsuitable SSAS investment succeeds against independent trustee | Global law firm

The Pensions Ombudsman has upheld a complaint by a member trustee of a small self-administered pension scheme (SSAS) against Rowanmoor Trustees Limited (RTL). The member claimed that RTL, as an independent trustee, had failed to conduct sufficient due diligence on the scheme’s investment. The Ombudsman agreed. However, the claim against Rowanmoor Group plc (Rowanmoor) as scheme administrator was not upheld, as the Ombudsman determined that it was not responsible for carrying out the level of due diligence suggested by the complainant.


In 2014, the member transferred his existing pension funds (£62,000) to a newly established SSAS after being contacted by an unregulated pension introducer about a potential investment in a Cape Verde hotel suite. The investment involved the purchase of a fractional ownership in a hotel resort through membership of a company limited by guarantee. In 2018, the member complained to the Ombudsman that the promise of an annual return of 7.5 per cent had fallen far short of guarantees and expectations.

The Determination

The complaint was not upheld against Rowanmoor as administrator as it had discharged its responsibilities in relation to the overall administration of the scheme in a broadly satisfactory manner.

However, the Ombudsman held that in its role as independent trustee, RTL had failed to exercise due skill and care in the performance of its investment functions, resulting in a breach of trust.

Although the trustees (that is, the member trustee and RTL) collectively had failed to fulfil their duties and obligations under the scheme’s governing rules, the relevant legislation and common law, the Ombudsman pointed out there was a clear disparity in knowledge between them.

The member trustee was a lay investor with no real understanding or knowledge of the nature of the investment and its suitability. In contrast, the independent trustee should have had a detailed knowledge of its duties and the capability to carry out extensive due diligence on the investment and prevent it. It was also expected to obtain and consider proper advice as to the suitability of the investment and have regard to the need for diversification, which it had failed to do. In addition, RTL was charging the complainant for professional trustee services.

The Ombudsman decided that apportionment of responsibility, rather than holding the trustees jointly and severally liable, was more appropriate. In this case, 80 per cent should be borne by the independent trustee and 20 per cent by the member trustee. While the exoneration provisions in the scheme documentation protected RTL from most activities, it could not rely on those protections in the performance of its investment function. Section 33 of the Pensions Act 1995, prohibits exclusion or restriction of liability to “take care or exercise skill in the performance of any investment functions”.

The Ombudsman directed the independent trustee to put the member back in the position he would have been had the investment not been made and to pay him £1,000 for the materially significant distress and inconvenience caused.


While this decision may seem harsh at first glance, the Ombudsman gave weight to the imbalance between the member and RTL in their trustee roles.

Here, the Ombudsman found that RTL had failed to act in the member’s best interests, particularly regarding the choice of investments and the due diligence required before investing, which was a breach of the duty of care owed by RTL as trustee. RTL had failed to understand its duties as independent trustee or make any attempt to meet them. It had invested the majority of the member’s fund in an “opaque, illiquid and risky” venture which no reasonable trustee would have done.

The Ombudsman noted that other complaints could have different outcomes depending on how each scheme is set up and the investments they contained.

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