Hogan Lovells

Key Dates

Judgment given on 23 January 2018.

The Pensions Regulator v Payae Limited and others heard on 5-6 and 8 December 2017.


The High Court (Pelling J) has held that four individuals who were responsible for a series of pension liberation scams should repay £13.7 million transferred out of their victims' pension schemes.

The Pensions Regulator (tPR) successfully applied for an order under section 16 Pensions Act 2004. Under section 16, where tPR demonstrates that a person has been involved in the misuse or misappropriation of assets of an occupational or personal pension scheme, the Court may order the person to restore parties to the position they were in before the misuse or misappropriation took place. The Court also found that the four individuals responsible for the pension liberation scams had been acting dishonestly.


The pension liberation fraud involved 245 members of the public being persuaded via cold calling and similar techniques to transfer their pension savings to one of 11 scam pension schemes operated through Friendly Pensions Limited. The scheme members were offered cash "rebates" on the transfer, which they were expressly told should remain confidential. The members' transferring schemes were provided with sham employment contracts purporting to demonstrate that the members were employed by a sponsoring employer of the receiving schemes.

The Court found that much of the money transferred to the receiving schemes was then moved through a complex arrangement of other entities, using bank accounts in the names of the principal perpetrator's family members, to benefit the principal perpetrator and the three other individual defendants. Some of the funds were invested without security in an off-plan hotel development in St Lucia, whose developer became insolvent. Pelling J held that no trustee acting reasonably would have invested significant funds in this project.

Finding of dishonesty

The Court accepted that it was not necessary to find that the defendants had acted dishonestly for tPR's application under section 16 to succeed. However, tPR chose to argue that the individual defendants had been dishonestly concerned in the misuse or misappropriation of scheme assets, to bring them within the scope of section 281(3) Insolvency Act 1986. Section 281 provides that discharge of a bankrupt does not apply in respect of any debt incurred through fraud or fraudulent breach of trust. The Court found that each of the four individual defendants had acted contrary to ordinary standards of honest behaviour in their involvement with the pension liberation arrangements.

Date Accessed: 28/05/2022