The pension reforms of the past few years have had an impact on small self-administered schemes (SSAS) as much as any part of the industry. But SSASs are now under a particular spotlight as their growing prominence brings with it some less welcome entrants to the market.
SSASs are a type of occupational pension scheme run by an employer for executives, key employees and directors. Unlike self-invested personal pensions (Sipps), they can only contain up to 12 members, including the scheme founder – for example, the employer or director of the company.
As the name implies, SSASs are administered by their own trustees. Schemes are also regulated by the Pensions Regulator (TPR) rather than the FCA. Single-member schemes are likely to escape the net entirely. These points of differentiation from Sipps have led to a rise in pension scams conducted via SSAS-like structures.
As a result, a tightening of regulations has been expected for some time. A government consultation on scams, issued in December 2016, has been welcomed by providers seeking to break the link between mainstream SSAS and those structures created solely to take advantage of the unsuspecting.
Most prospective measures outlined in the consultation – such as banning cold-calling and proposing that only “non-dormant” companies be used for scheme registrations – have been backed by the industry. The most significant idea is the acknowledgement that some have called for professional trustees to be reintroduced.
Return of the professional?
Until pensions simplification in 2006, SSASs were required to appoint a professional trustee (often referred to as a pensioneer trustee – a trustee with pensions expertise) in order to be considered a legitimate operation.
The 2014 introduction of HMRC’s ‘fit and proper’ requirement for scheme administrators was intended to address the rise of inexperienced trustees, with all SSASs obliged to appoint administrators considered to be “familiar with and capable of competently performing the scheme administrator’s responsibilities”, according to HM Revenue & Customs’ guidance.
But as the recent consultation indicates, the requirement was not as effective as intended, given that it only applies to the scheme administrator rather than the trustees who have the final say on investments.
“Despite the fact [the administrator] is a crucial role that must be filled for any scheme to attract and maintain its registered pension scheme status, [it] is still a very narrow function under the way in which a scheme is operated,” says Zachary Gallagher, chairman of the Association of Member-Directed Pension Schemes (AMPS).
Mr Gallagher adds that the range of trustee responsibilities, which include day-to-day scheme management and making investment decisions, mean that enforcing a professional trustee requirement would be “a better move against pension scams” than the revenue’s ‘fit and proper’ obligation.
Conversely, Nigel Bennett, sales and marketing director at InvestAcc, proposes that the government could instead introduce “an extension of the current ‘fit and proper’ requirements for scheme administrators”.
Mr Bennett adds: “Any new regulations need not only deter scammers, but prevent them from operating as soon as they have been identified.”
Facts and figures