As I think everyone in the pensions sector knows, I have been a huge advocate of the self-invested sector for decades, due to the flexibility of investments and tax advantages.
SSASs also offer a useful tool to the new Government in respect of their well-publicised growth aspirations. After all, it’s a solution that has the opportunity to support retirement saving as well as offering investment into small- and medium-sized businesses.
But I continue to be concerned and indeed frustrated by some of the consequences of changes implemented as part of A-Day in April 2006 – namely, the removal of the requirement to have a compulsory pensioneer trustee. Instead, the rules required that a scheme administrator was appointed.
The challenge here is that practically any individual could be a scheme administrator, even if they had little knowledge of pensions or regulations. This current arrangement is a risk that must be mitigated with the introduction of additional regulation.
In my eyes, there is a significant risk that non-professional scheme administrators may not be equipped to discharge the trustee responsibilities as well as maintaining regulatory knowledge and adapting to key changes – for example, the inclusion of unused pension funds in the scope of inheritance tax.
Practically any individual could be a scheme administrator, even if they had little knowledge of pensions or regulations
There may be conflicts of interests for scheme administrators if they are wearing several hats, including trustee and SSAS member, particularly if HMRC levied tax charges on the trustees in the event of holding a non-allowable investment.
If we fast forward to 2017, the then TPR executive Andrew Warwick-Thompson announced unfairly that SSASs had become the “vehicle of choice for criminals setting up a scam”, The view of the TPR was that SSASs were being used to enable pension liberation and there was a high scam risk associated with the unregulated solution.
Warwick-Thompson’s comments were misguided, but there remains a small minority of bad actors within the SSAS industry that take the opportunity to mislead and take advantage of the lack of regulation. It is these bad actors that we need to weed out to protect consumers and also the integrity of SSASs.
I propose the introduction of a requirement for a regulated SSAS operator, akin to the existing FCA framework for SIPP operators. The logical body to regulate SSASs would be The Pension Regulator (TPR). They already have an element of SSAS oversight as any new SSAS with more than a single member must be registered with them at the establishment.
How have SSASs survived the test of time?
Diligent SSAS providers will likely already be undertaking many of the responsibilities that you could reasonably expect TPR to require of a professional SSAS operator. But I would argue that the regulation would not need to be as stringent as it is for SIPPs, due to the structure of a SSAS and the involvement of a sponsoring employer.
Due to the nature of the SSAS, they need to be more flexible than their SIPP cousin as the trustees are likely to be business owners who are balancing the management of their company and pension. It’s important that we don’t lose the flexibility that SSASs offer.
I don’t think that SSASs get the recognition that they deserve in terms of providing a flexible solution for SMEs and business owners
Professional trustees have the expertise to negotiate the regulatory challenges and to flag risks such as potential liberation scams or high-risk investments. This expertise is invaluable and can be challenging for some self-appointed scheme administrators.
As far as I am aware, there isn’t any accurate data regarding the number of SSASs held, or the value of assets held within them. Unlike the regulated world of SIPP, there isn’t the database of information that can be called upon.
However, as a general observation, I don’t think that SSASs get the recognition that they deserve in terms of providing a flexible solution for SMEs and business owners.
Introducing effective and balanced regulation would help to unlock the full opportunity offered by SSASs, making the solution more mainstream and supporting the government’s growth agenda.
Caitlin Southall is head of SSAS proposition at WBR Group
Comments