A number of banks are refusing to open accounts for small self-administered schemes, stating that they need to be affiliated with a regulated entity or have a corporate trustee in place, neither of which is deemed mandatory by regulators.
Neil MacGillivray, chairman of the Association of Member-directed Pension Schemes, previously raised this issue in October, however he said the situation has not improved.
“A number of banks are refusing to open accounts for Ssas as they are unregulated. It’s a bit like booking a package holiday but when you turn up you are expected to have a commercial pilots license. People who administer non-regulated have to be regulated to open accounts, according to some banks.
“The main concern is that Ssas will be used for pension liberation; it’s down to the perceived risk.”
Of the lenders FTAdviser spoke to, only HSBC and Santander appear to offer bank accounts, with the former stating “satisfactory completion of due diligence” is needed and the latter saying there may be a “requirement for additional checks”.
The Lloyds Group told FTAdviser that following a policy review a year ago, it will now only accept new Ssas business from an “FCA regulated introducer or an introducer who also has an FCA regulated business within their group”.
Following a 2013 review, a spokesperson for Cater Allen said it will only accept applications where the administrator, pension provider or financial intermediary is authorised by the FCA.
“In agreeing the procedures, Cater Allen had a dialogue with Amps to make sure that we reflected any concerns with regard to the security and safeguarding of scheme bank accounts.”
As there is no legal requirement for a Ssas to be regulated, this has caused issues, with Mr MacGillivray commenting: “They are telling practitioners to be the trustees. People who have a successful business are being asked to do something that they are not capable of achieving.
“Some are saying a scheme administrator must be authorised by the FCA, which they don’t have to be. Two banks are in the minority, but this trend will continue and Ssas are being put in a difficult position.”
Furthermore, Metro and the Royal Bank of Scotland Group both said that a corporate professional trustee must be in place for them to provide bank services to a Ssas.
However, HM Revenue and Customs confirmed to FTAdviser that it is not mandatory for a Ssas to have a corporate trustee, with a spokesperson adding: “We have no plans to make corporate trustees mandatory.”
Andrew Warwick-Thompson, executive director for DC and public service pension schemes for the Pensions Regulator, told FTAdviser that they are “aware of an increase in scam activity based on small occupational pension schemes. Smaller schemes benefit from certain legal exemptions, which some may seek to exploit”.
While the regulator could not comment on the individual requirements of lenders, Mr Warwick-Thompson said that as part of its pension liberation campaign, “we urge pension providers, trustees and scheme managers to undertake due diligence when considering member transfer requests in the fight against pension scams”.
He said: “We welcome all initiatives by the pensions industry to help to frustrate scam activity.”
However, Mr MacGillivray believes the banks’ stance is unnecessary, partly due to HMRC’s new ‘fit and proper’ test which ensures there is a “layer of protection in place” and that, since the Budget, HMRC has additional powers.
The revenue can refuse to register a pension scheme if their tax officers believe the scheme administrator is not a fit and proper person to fulfil that role. The chancellor also introduced new penalties for false information of up to £3,000.
However, Richard Mattison, director at Ssas administrator Whitehall Group, does not think HMRC’s powers go far enough and has urged The Pensions Regulator and HMRC to revisit pension liberation to find a way “that doesn’t affect the rest of the world”.
“We should go back to the pre-A day list of approved providers. Back then a Ssas scheme had to have a corporate trustee who was rubber stamped by HMRC.
“A-day came along and removed this requirement due to EU legislation as it doesn’t recognise trusts, so then the industry said ‘what about professional administrators’ and HMRC ignored this.
“If we go back to the provider list, everybody will know that it’s not a liberator and people can just get on with things.”
Adam Wrench, head of product and business development at Sipp and Ssas provider London and Colonial, added that London and Colonial make Ssas administrators appoint them as a professional trustee and it is also mandatory to be the compulsory signatories.
“It is to protect them from themselves. If banks are saying corporate trustees must be in place, that makes perfect sense and it is encouraging they are saying that. That’s a good thing in light of pension liberation.”
donia.o’loughlin@ft.com
