Industry figures are calling on the government and HM Revenue and Customs to bring back pensioneer trustees to regulate Small self-administered schemes, as a move The Pension Regulator has admitted would stave off scammers.
HMRC has been told to restore the requirement for Ssas to have a pensioneer trustee following their abolition on A-Day in April 2006, in a bid to slash the amount of pension fraud taking place.
In April 2006, HM Revenue & Customs changed the rules so that Ssas schemes no longer had to have a pensioneer trustee in order to operate.
Pensioneer trustee is a status conferred by HM Revenue & Customs on individuals or firms with specialist knowledge in the area of pensions law and pensions administration.
The role of the pensioneer trustee typically involves the establishment and administration of self -administered pensions.
Since HMRC scrapped the mandatory requirement for pensioneer trustees, followed by former chancellor George Osborne granting pension freedoms from April 2015, Martin Tilley, director of technical services at Dentons, said a growing number of Ssas were now falling foul of scams.
Speaking to FTAdviser, a spokesperson for The Pensions Regulator admitted "the resurrection of a requirement for pensioneer trustees would greatly reduce the risk of Ssas' being a vehicle of choice for scammers, who often market them as ‘products’ offering esoteric investments and unrealistic returns".
But they added: "For pensioneer trustees to truly mitigate the risk of small schemes being used as scam vehicles, careful thought would need to be given to the approval and regulation of those trustees, and the capacity of a suitable regulatory body to take on that task."
Mr Tilley said an increasing number of Ssas members, without the guidance of a pensioneer trustee, are also finding they have broken pension tax rules and being hit with an unexpected bill from HM Revenue & Customs.
As a result, Mr Tilley said it was vital that the requirement for a Ssas to appoint a pensioneer trustee is re-instated.
Mr Tilley said: "When this role was removed, many Ssas clients, who had seen the need for the pensioneer trustees as a necessary evil, chose to remove them to save costs, choosing instead to go it alone.
"The problems they encountered were that at the same time as the removal of the pensioneer trustee role, HMRC moved from a system of discretionary approval of pension schemes to one of registered pension schemes."
Mr Tilley said many self-run Ssas fell foul of the new rules as those that had removed or sacked their professional trustee were trying to do the administration themselves, but without knowing all the HM Revenue & Customs reporting rules or criteria where certain assets are acceptable and they quite often made mistakes that were causing tax penalties.
In some cases HM Revenue & Customs tax penalties can be up to 70 per cent of the monetary value of the misdemeanours.
"The other issue that faced HMRC was collection of the tax penalty. This was always an after the event issue. Often it was impossible to track down the perpetrators of the taxable penalty as the money in the scheme had long gone and the trail was cold."