The ombudsman, who adjudicates on pension disputes, has ordered that Mr Ashcroft's pension entitlements should be reduced to compensate those who lost out. Mr Ashcroft, who was chairman of Coloroll until shortly before the wallpaper and home furnishings group collapsed in 1990, will lose at least pounds 117,000 and potentially much more. The total amount involved could be up to pounds 400,000.
The Coloroll Directors Retirement Benefits Scheme lost more than pounds 117,000 after buying Mr Ashcroft's luxury flat in London's Chelsea Harbour for pounds 412,500 at a time when property prices were tumbling. The pension scheme trustees are also accused of improperly introducing an unusual and 'invalid' salary 'cap' which had the effect of increasing Mr Ashcroft's final pensionable salary by more than pounds 68,000 to pounds 375,000.
These moves left other Coloroll directors with much lower pension entitlements than they would otherwise have received. Michael Platt, the Pensions Ombudsman, found that Mr Ashcroft and his fellow trustees - Philip Green and Eric Kilby, respectively Coloroll's managing and financial directors - were guilty of a breach of trust and of maladministration of the pensions scheme.
But yesterday, Mr Ashcroft, of Brindle in Lancashire, rejected any suggestion of impropriety. He said: 'As far as I am concerned, we acted properly and took the proper advice.'
Mr Platt ruled that the purchase of Mr Ashcroft's flat resulted in a benefit to the scheme which was 'undeniably less' than that received by Mr Ashcroft. He ordered that 'any loss should be borne by the individual trustees, and more so by Mr Ashcroft, who profited directly . . . in being relieved of an asset of declining value which he could not otherwise sell (at least for a similar amount).'
Mr Ashcroft complained he was being judged with the benefit of hindsight. He said that, when he sold his flat in July 1989, one could not have foreseen that it would collapse in value. It was only in retrospect that the purchase looks such a bad deal for the pension fund, he suggested.
Mr Platt is sceptical about this and observes the sale was rushed through without some precautionary checks. He had seen no evidence to suggest the trustees had taken advice, as Mr Ashcroft said. Yet even if house prices were not falling sharply, Mr Ashcroft's flat would always have been a dubious investment for the pounds 1.5m pension fund, representing 28 per cent of the pension scheme's assets - a huge commitment to a single, unlet residential property, particularly one so closely linked to Mr Ashcroft. The same investment would not be permitted today since the Government introduced rules limiting 'self-investment' to 5 per cent.
The decline in the value of the flat has worsened the problems faced by the underfunded pension scheme following Coloroll's collapse. The nine members, all former Coloroll directors, who were not also trustees, would have been restricted to greatly reduced transfer values because of the trustees' running of the fund. The ombudsman's office believes between pounds 200,000 and pounds 400,000 will have to be reallocated from the trustee members to the benefit of the other members.
Mr Ashcroft found it odd that he has been criticised for 'injecting assets' into the pension fund, since he had taken a loss by selling his Chelsea Harbour flat for pounds 412,500, pounds 12,500 less than he paid for it a year earlier. He conceded he had received cash in return. 'In all my decisions as a director of Coloroll for 12 years, you will find nothing in my track record that would allow any criticism (that) there has been illicit payments or anything like that,' he said.
Those criticised by the ombudsman's report have two weeks to appeal to the High Court. The pension scheme's lawyers, McKenna & Co, its actuary, Noble Lowndes, and the corporate trustee, that replaced Mr Ashcroft, Mr Green and Mr Kilby, will meet tomorrow to decide whether to appeal.
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