Why advisers need to be SSAS savvy
The number of genuine new SSAS is on the increase, says Martin Tilley, director of Technical Services, Dentons Pension Management, and the need for schemes to employ professionals that understand the tax and legal side is essential
Small Self Administered Schemes (SSAS) have been heavily featured in the press recently and not always in a positive light.
At our London flagship seminar earlier this year 48 out of 49 advisers voting supported the continued use of SSAS, albeit with a variety of additional safeguards to protect the members. Clearly advisers see a market for the product that has a role in encouraging retirement saving and which can also be used legitimately to help small businesses grow.
It is difficult to gauge the number of SSAS in existence since there is no single all-encompassing survey. Figures from The Pensions Regulator omit single member schemes and HMRC’s data does not adequately differentiate between fully or partly insured executive pension schemes created by trust and a full blown SSAS.
What is clear from our own experience is that the number of genuine new SSAS is on the increase as is the movement of clients between practitioners.
A key marketed advantage of SSAS over SIPP is the element of control vested with the scheme members as co-trustees. In contrast, an individual SIPP is integral to the SIPP provider and governed by whatever rules and parameters the provider chooses to set. If a SIPP provider puts up their fees, the service levels diminish, or they change their proposition (for example stop holding non-standard assets), the client has to live with the changed product or go to the trouble of finding a new provider, create the new SIPP and transfer the assets across to it.
A SSAS on the other hand, is a freestanding trust specific to the founder employer and its members. If the service levels and fees of the practitioner appointed to create it, register it with HMRC and perform administrative functions, become unpalatable, the practitioner can be removed and replaced. The point being the trust and its advisers remain under the control of the members and/or founder employer.
Another feature that was introduced in September 2014 is the need for all schemes to have a party or parties appointed to act as ‘scheme administrator’ for tax purposes who meet the “fit and proper” requirements of HMRC. These can be found as a pdf online on the government website.
Each person fulfilling the role of scheme administrator must have a sound understanding and sufficient working knowledge of pensions or pensions tax legislation and be capable of assuming the significant duties and liabilities of the scheme administrator, or they must employ someone who does.
This requirement was intended to plug the gaping hole in stewardship of SSASs left after the withdrawal of the Pensioneer Trustee in 2006. Sadly, it has not and, in some cases, it has led to a false sense of security and potentially further detriment to the market. What has happened is that the market is now confused by a multitude of roles and services provided by co-trustees, administrators and practitioners many of which fulfil only the most basic of responsibilities.
So, what should you be looking for when researching a SSAS practitioner?
At its most supportive level; a practitioner’s professional trustee company will be a co-trustee of the scheme. They will also act as either co-scheme administrator with the other scheme trustees or will hold the role of scheme administrator themselves. The scheme’s assets will be registered to include the professional trustee company and they will be a signatory to all scheme bank accounts. The practitioner will therefore be able to prevent any inappropriate distribution of funds and the triggering of any tax charges. They will be aware of scheme transactions ahead of time, or as they take place and therefore will be in a position of knowledge to report any actions requiring them to do so, make annual tax returns and account for any tax at the appropriate time.
At the other end of the spectrum are those practitioners employed as the party with the appropriate knowledge, therefore enabling the trustees and those actually fulfilling the administrator role to argue that the conditions of a fit and proper administrator have been met. The reality is this service can be reactive rather than proactive and events triggering tax penalties could occur without their knowledge or ability to prevent them.
The DWP and HM Treasury’s response following consultation with the industry on scam prevention has so far shied away from insisting upon the appointment of a professional trustee/scheme administrator. Instead, the response favours establishing whether there is an employment link between the scheme employer and the members and, if not, refusing to grant or withdrawing registered scheme status and withdrawing statutory transfer rights for individuals wishing to transfer to such schemes.
Whatever we see from changes in legislation, you should consider a current review of your clients’ SSASs, however supported, to ensure they are able to continue to operate as registered pension schemes.
Visit the Dentons Pension Management website