Industry figures have called for tighter small self-administered scheme regulation in a bid to prevent more activity by scammers.
In October last year, Phoenix reported it had prevented £26m of pension fraud to date, with almost £2m worth blocked since pension freedoms were introduced in April.
The UK’s largest specialist consolidator of closed life funds identified 1,650 suspicious companies or schemes which it believes are involved in scams, and the firm identified a move to targeting savers via Sipps and Ssas.
Ssas are currently regulated by The Pensions Regulator.
However Phil Smith, chief executive of the Embark Group - parent of Sipp providers Hornbuckle and Rowanmoor - told FTAdviser he hoped the Financial Conduct Authority could regulate Ssas in the same way as self-invested personal pensions.
He said: “I see quite a parting of the ways in our sector, which seems to be running away from Ssas, which in many ways is illogical.
“I think the primary driver isn’t the wrapper itself. So I think people post-RDR have become increasingly concerned about who they work with on a counterparty basis, the quality of advice in effect and more importantly the type of assets that are finding their way into products.
“The only thing if I could wish is that the regulator (the FCA) could start regulating Ssas,” Mr Smith said, on the grounds they have the same purpose, underlying investments and pension rules as Sipps.
Martin Tilley, director of technical services at Dentons Pensions Management, said his firm has found an uptick in Ssas business in the last two or three years, and year-on-year.
However he flagged concerns with the increasingly mainstream push of Ssas.
“Ssas without a shadow of a doubt are vulnerable to scam sales people.
“Sipp providers now are under a huge responsibility to make sure they look after very carefully what goes into their asset book, whereas a Ssas is an individual trust, the assets they accept are decided upon by the schemes trustees.
“If you don’t have a professional trustee who is applying with the same logic as a Sipp provider is to the acceptance of assets, you could find Ssas will be accepting assets they really ought not to be whether they are scams or they are just inappropriate.
“That worry still exists.”
Mr Tilley said he would not be averse to some sort of increased regulation of Ssas but would like it to be similar to an historic template of trustees.
“It would be better to have a more proactive body who was able to prevent inappropriate investment or administrative events not being done correctly that result in tax charges and fines and reporting and things like that.”
The FCA’s remit is for personal plans, policies and contracts and Ssas is an occupational pension scheme, he said.
Andrew Warwick-Thompson, executive director at The Pensions Regulator, said the regulator is concerned about Ssas’ being exploited by scammers.
He said: “[Under the current] lighter legislative and regulatory framework, Ssas are exempt from many of the governance requirements, on the basis that they are generally run by the members themselves. This is a very different regime from the FCA approach to the regulation of Sipps.
“In Project Bloom, the multi-agency task force set up to combat scams, we remain particularly concerned about Ssas’ being used by scammers who are exploiting this type of scheme.
“The models we have seen involve mostly single member Ssas. We strongly advise consumers to take advice, from a financial adviser authorised by the FCA, before making any decision about investing in this kind of pension scheme.
“We are engaged in discussions with government and the pensions industry about possible changes to the rules on Ssas’ which would make them more difficult, or less attractive, for scammers to use.”
Chris Daems, director at financial advisers Cervello Financial Planning, said: “Whilst the attractive features of both Ssas and Sipps are their investment flexibility, this does mean they are used to scam people.
“The challenge is in still allowing the use of flexible pension wrappers for the right people, but penalising the scammers and the individuals who distribute these scams in a more robust way.”
ruth.gillbe@ft.com
