Like other retirement savings products, small self-administered schemes (Ssas) have benefited from the introduction of the pension reforms in 2015. Three years on, however, a growth slowdown and the prospect of more targeted reforms have left providers wondering what lies in store for the sector.
A form of occupational pension scheme sponsored by an employer for executives, key employees and directors, a Ssas is run by its trustees, which are generally members of the scheme. Each scheme cannot have more than 11 members.
While larger schemes are overseen by The Pensions Regulator (TPR), one-member products remain unregulated, leaving them prone to the kind of malicious activity that has increased markedly in light of the pension freedoms.
The government has made efforts to stamp out unscrupulous activity. This includes a consultation on pension scams carried out last year, which resulted in a number of measures being unveiled, such as a clampdown on cold calling.
However, industry figures fear that some of the latest Ssas-related measures may result in “heavy-handed” approaches that could stifle above-the-board practices. They believe some measures expose the difficulty in finding a balance between establishing trust in the sector and suffocating it.
This equilibrium has been called into question before now. HMRC blocked tax relief on in-specie contributions for Ssas and self-invested personal pension (Sipp) providers, and last year asked firms to pay back reliefs earned over the past four years. A legal challenge has been made, but Mattioli Woods, in its latest results, says it is setting aside £900,000 for HMRC’s demands.
Although the TPR regulates Ssas, the FCA is usually the focal point for general consumer complaints. Despite the negative publicity for the sector - TPR executive director Andrew Warwick-Thompson himself caused controversy last year by suggesting new Ssas and transfers to existing schemes be banned - there is little evidence that existing clients are turning against the schemes.
A freedom of information request made by Money Management shows that the FCA received 10 complaints or expressions of dissatisfaction relating to Ssas in 2017 – higher than the two in 2016, but in line with figures for 2014 and 2015. Notably, the number of complaints over the final six months of last year stood at just two.
There are other worries, however. Asked to list pressing issues facing the sector as part of this year’s Money Management survey, a number of industry participants have pointed to the Finance Bill 2017-18, which gives HMRC unlimited discretion to deregister any occupational pension scheme that has a “dormant” sponsoring employer.
Under this approach, deregistration – which would effectively remove a scheme’s tax privileges – could be used against a scheme sponsored by a company that has been dormant for at least one month in the past year.
The measure, which could be used to tackle scammers, also poses a threat to schemes backed by legitimate entities – including dormant companies used to start up a business where a Ssas is set up in the first year, and companies that are wound down in cases such as a takeover.