Pension schemes in limbo as banks refuse to open accounts

Small self-administered pensions are being left in limbo by major banking groups that are frequently refusing to accept new business and open bank accounts due to concerns about schemes not being regulated, according to the sector’s trade body.

Speaking to FTAdviser, Neil MacGillivray, head of technical support unit at James Hay Partnership and honorary secretary of the Association of Member-Directed Pension Schemes, said that three banks, one of which is a high street bank, has refused to open up bank accounts for Ssas operators.

Mr MacGillivray declined to name the banks involved and stated that the trade body is conducting an ongoing investigation.

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He said: “Amps has had four members that have experienced this problem. Some banks are starting to say if you are not regulated by the FCA, we won’t allow you to open up a bank account. Banks are doing this even if they have a long-term relationship [with the Ssas provider].

“We have seen one case where a member was asked to move their bank account as the bank does not want to be involved in that kind of business. If they are not regulated by the FCA to provide a pension they don’t want their business.

“This is a knee-jerk reaction. Banks don’t understand the structure of Ssas.”

Mr MacGillivray said Amps’ view is that this is due to pension liberation, which he said banks are particularly concerned about in relation to Ssas as the schemes are not formerly regulated and do not require professional administrator.

He added that the same providers operating both Sipp and Ssas business were not experiencing similar problems, as self-invested pensions are formally regulated and so banks are more comfortable.

The revelations come just weeks after similar concerns were raised in relation to major life and pensions firms refusing to transfer to Ssas, claiming that they are having difficulty performing adequate due diligence to ensure the schemes are not be used for ‘unlocking’.

Providers that have refused transfers include Aviva, Scottish Life, Legal and General and Prudential.

John Lawson, head of policy for pensions and investments at Aviva, told FTAdviser he understood advisers’ frustrations but said providers are being forced to take on the role of regulators due to a lack of action by the Pensions Regulator and Financial Conduct Authority.

He added pensions liberation scammers are increasingly using Ssas to hide their schemes as they are easy to set up and do not require the use of a professional administrator, which is prompting caution in relation to the products among providers.

Mr MacGillivray said: “If you run a Sipp and Ssas, despite them being separate businesses, you are okay as part of it is regulated. Ssas’s have been around before Sipps, are very popular and serve a good purpose, and they should not dismiss them because of pension liberation.

“Banks would carry out due diligence if I opened a bank account to make sure I am ‘legit’ and it should be the same for Ssas. That should be sufficient and it shouldn’t be a problem if you have been an existing client for 10 years. This needs to be looked at.”