New scheme administrator ‘fit and proper’ person rules coming into effect from 1 September are set to radically professionalise the running of small self-administered pension schemes, according to self-invested pension provider Dentons.
The amendments to the Finance Act 2004 were primarily designed to prevent or discourage pension liberation, but the requirement for a ‘fit and proper’ person will have additional implications, Dentons’ director of technical services Martin Tilley said.
From the start of September, HM Revenue and Customs will have new powers to send information notices to scheme administrators in order to help them decide whether they are fit and proper persons.
It will also have new powers to enter business premises and inspect documents to help make these decisions, and may refuse to register or de-register a pension scheme where it appears that the administrator is not ‘fit and proper’.
Mr Tilley told FTAdviser that many of the senior figures at these schemes work across their firms’ Sipp operations as well as Ssas and in fulfilling the administrator role will be bringing a similar level of experience and diligence.
“The scheme may now be getting a professional fiduciary body that can hopefully prevent poor administration and associated potential tax penalties, but also someone who can provide the same level of due diligence on potential investments within a Ssas, thus protecting members from the scams that have been a worry after the clampdown by the FCA on Sipp asset acceptance.”
Mr Tilley stated that while scheme administrators would not be expected to comment on the suitability of an investment, the principles that the Financial Conduct Authority require Sipp providers to apply when assessing acceptance of investments mean trustees and administrators would have to operate similar due diligence.
He said: “Fees for asset acceptance and due diligence would likely be comparable.
“In terms of asset acceptance a prudent trustee/administrator would hopefully prevent inappropriate assets being accepted and I would hope Ssas’ will not be subject to the unregulated assets scams that have plagued some parts of the Sipp market.”
Ssas’s have no capital adequacy requirements while Sipps now do, which some have suggested means they may become the product of choice for non-standard assets.
However, Mr Tilley pointed out that generally Ssas’s are more costly to administer than an individual Sipp and require additional administrative tasks.
Small self-administered pensions are essentially occupational pensions which have similar investment flexibility to Sipps but are set up under their own trust, rather than a master trust. While Ssas’ are designed for use by small firms, in practice only one member has to be a director of a business.
Back in May, Rowanmoor launched a new service in response to he HMRC crackdown, highlighting a possible opportunity for providers and intermediaries to give advice to trustees and administrators of Ssas’.
