A crackdown by the UK tax watchdog targeted at self-directed group pension schemes and designed to prevent so-called pension liberation is causing providers to refuse to takeover legacy schemes and prompted fresh calls for a specialist administrator requirement.
Dentons Pension Management told FTAdviser it has been turning away small self-administered scheme business as a result of new ‘fit and proper’ rules, which were brought in last September and handed new powers to HMRC to check standards of administrators and revoke authorisation.
Martin Tilley, director of technical services at the self invested pension provider, said that Dentons has completed four Ssas takeovers this year, and has another eight “in progress”. However, it has also looked at eight to 10 schemes which it had to turn away in their current form.
For some this was because historically they have breached HMRC rules, often unknowingly, prompting Mr Tilley to highlight the need for specialists to oversee schemes.
Under the new legislation, HMRC may decide not to register a pension scheme if any scheme administrator appears not to be a ‘fit and proper’ person. The rules are designed to prevent largely unregulated Ssas schemes from being set up for the purposes of pension unlocking or liberation.
There have been widespread concerns over fraud in relation to Ssas schemes for a number of years and repeated calls for new rules to require a specialist, qualified administrator to be appointed before a scheme is authorised.
Mr Tilley said that as a result of the new ‘fit and proper’ rules it is important to undertake a detailed analysis of the current situation and the history, as there is now a potential liability involved where the administrator is responsible for checking fines and tax that may be due.
Mr Tilley said: “The worrying thing is some clients don’t realise what they don’t know. They come to us thinking it was totally clean and tidy but two years previously had lent money from the pension scheme to the employer.
“Some of them had paid some money back and borrowed it back again. This will be treated by the revenue as a new loan and therefore they have made unauthorised employer payments and incurred a tax charge on payment.”
Robert Graves, head of pensions technical service at Rowanmoor Pensions agreed taking on Ssas business can give rise to liabilities.
“Ultimately there are liabilities if a scheme is not administered correctly, for example, unauthorised payments. As an administrator you inherit liabilities - a far cleaner way is to effect a transfer into a new scheme than doing what’s known as a transfer.”
He added that another option for firms was to act in a more limited ‘practitioner’ capacity at first to assist in getting a scheme up to standard, and then could talk about becoming the administrator later.
ruth.gillbe@ft.com
