St Helens pensions hit by Madoff 'scam'

The fund escaped relatively unscathed after it invested large sums of cash in a hedge fund run by disgraced stocker broker Bernard Madoff.

But many pension holders are now asking how their retirement funds could have been exposed to such a calamitous financial operation for the second time in less than three months.

The Merseyside Pension Fund confirmed they had cash invested in former US stock market chairman Madoff's firm - via their £21m investment in Bramdean Alternative.

The veteran Wall Street money-manager, 70, was arrested in the US this week on suspicion of security fraud after he was allegedly caught up in a £33billion pyramid-selling scheme.

But a spokesman for the Merseyside Pension Fund (MPF) played down the potential losses and moved to reassure their pension-holders.

As well as managing the accounts of more than 5,000 St Helens Council employees, the MPF also looks the retirement funds of staff at St Helens College and Helena Housing.

An MPF spokesman said: "The fund has stringent risk controls in place which ensure that its investments are diverse with limited exposure to any one asset class, market, sector or stock. The total value of the Merseyside Pension Fund is £3.7 billion. Figures from the end of October 2008 valued the fund's investments through Bramdean at £21 million. The Madoff element forms only 9.5 per cent of this.

"Based on the above figures, we estimate that recent events will reduce the valuation by approximately £2 million. Events are still unfolding but the impact on Merseyside Pension Fund's assets appears to be minimal and we can reassure scheme members that their pensions are safe and their statutory entitlements will not be affected."

Earlier this year, it was revealed that the Merseyside Pension Fund had money invested in collapsed Icelandic banks.

But the fund's bosses point the blame squarely at US financial regulators in the wake of revelation.

They added: "We are very concerned at the apparent failure of the regulatory and securities market regime in the US.

"The fund makes every effort to manage market and investment risk but relies on its investment managers to ensure that appropriate due diligence is undertaken and on regulators to maintain the integrity of markets.

"Madoff is only one of several elements that the fund has invested in through Bramdean. Although the overall value of the holding with Bramdean has reduced following recent news, we are hopeful that it will recover."