PensionsMay 22 2014

Budget crackdown opens trustee advice opportunity

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An opportunity for providers and intermediaries to provide advice support to trustees and administrators of small self-administered pensions has been highlighted after provider Rowanmoor launched a new service in response to an HMRC pension liberation crackdown.

The firm, which provides both Sipps and fully administered and trustee-serviced Ssas, is offering ‘scheme practitioner services’ for administrators of independent self-administered pensions who may otherwise fail a new test designed to root out fraudulent schemes.

As announced at the Budget in March, from September 2014 HMRC will require all scheme administrators of Ssas to be ‘fit and proper persons’, with sufficient knowledge of pensions tax legislation and related duties and liabilities.

The crackdown follows widespread claims in recent years that Ssas, which can be opened by anyone registered as a limited company director, are a main front in the battle against liberation schemes, as they can be set up in just a week and do not need to be administered by professionals.

Under the new rules either the administrator must meet the fit and proper test themselves or they should “retain the services of a professional adviser to act in such a capacity to fulfil this role”.

HMRC also has a new power to reject a scheme if their investigations suspect it was set up “for purposes other than of providing pension benefits”, and new penalties for false information of up to £3,000 will also be introduced in connection with the registration application.

Rowanmoor will be offering a variety of services as part of its Ssas practitioner offering, it said. These will range from providing technical expertise, actuarial, consultancy and scheme accountancy services, to scheme documentation and administration.

Ian Hammond, managing director at Rowanmoor Group plc, said: “The registered scheme administrator for the Ssas takes on responsibility for ensuring the scheme is run in accordance with legislation, including any necessary reporting to HMRC, and is ultimately liable for scheme sanction charges for any breaches.

“Given the highly complex tax rules and legislation surrounding Ssas, we recommend this role is undertaken by a professional company. For existing Ssas which have been administered without the involvement of a professional and may be facing hefty fines as a result, Rowanmoor Group’s new Ssas practitioner services offer a possible solution.

“We will aim to take the pressure off employers and member trustees with scheme administrator responsibilities, supporting them to efficiently govern their schemes.”

Mr Hammond added that pension liberation “continues to be a significant issue within the pensions industry and there is a fear that the increased pension flexibility post-Budget could lead to further fraudulent activity”.

He said: “The recent introduction of the ‘fit and proper persons’ criteria by HMRC will help to ensure schemes are administered correctly.

“Those involved with running a Ssas will need to have an even greater knowledge of pensions legislation and terminology to fulfil their duties as a scheme administrator.”

Last year FTAdviser reported on complaints that providers including Aviva, Scottish Life, Legal and General and Prudential were delaying or refusing transfer requests to Ssas as the schemes could be a guise for a pension liberation fraud.

The term ‘pension liberation’ is the name for the process by which people release their pension funds before retirement and convert their pension benefits partly or entirely into cash.

This usually involves the transfer of pension benefits away from the scheme that currently holds it to a new scheme that makes the transfer value available as a cash payment back to the member, either directly or indirectly via loans which the member is notionally required to repay.

These deductions can typically result in only 70 per cent to 80 per cent of the original value being available. In addition individuals run the risk of HM Revenue & Customs imposing tax charges of up to 55 per cent, which can rise to as much as 70 per cent with penalties.