A Yorkshire factory risks closure after an IFA put £2m of the firm's pension scheme money into failed investment company Keydata.
Leeds-based IFA firm Lampott advised Micro Metalsmiths' pension trustees to invest half the company's final salary scheme in Keydata bonds.
Micro's 120 staff face redundancy if the £2m is not recovered, the Daily Mail reports.
Keydata ceased paying the promised 7% income in February.
This year Micro has had to siphon £160,000 from its everyday operations to keep its pension fund, from which 50 retired workers are drawing pensions, afloat.
Until 2004, the company, founded in the Sixties, ran a final salary pension scheme for employees. In 2007, the pot was valued at £5.25m.
Christopher Shaw, Micro's founder, managing director and one of its trustees, says the pension fund had been invested in the stock market and had lost money and was moved into Keydata to avoid risk.
"As we were in the position of having a fund surplus, we wanted little risk."
Luxembourg-based Lifemark's bond were sold in the UK by Keydata as low risk with capital protected and no stock market exposure.
However mis-calculations in the traded life policies which make up the fund's assets have forced Lifemark to take up emergency funding from Norwich & Peterborough Building Society and a US hedge fund CarVal, to stave off insolvency.
The Financial Services Compensation Scheme (FSCS) has pledged to offer compensation up to its limit of £50,000, but has yet to work out how much Lifemark is worth.
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