Valentine’s Day 2017 was arguably the day the small self-administered schemes (Ssas) industry got a shock.
This didn’t come from yet another fraudster's actions or a judge ruling a provider should have done better due diligence, but rather the regulator itself.
The Pensions Regulator's (TPR) then executive director for regulatory policy, Andrew Warwick-Thompson, posted a blog on the regulator's website entitled, ‘Helping trustees stop scams’.
The article makes a lot of sense, and I encourage you to read it. However, it is this paragraph that made Ssas providers and advisers worry: “So, I believe that pension transfers to Ssas arrangements ought to be banned. In fact, to put a stop to their abuse, I believe that an outright ban on the establishment of any more Ssas arrangements also warrants serious consideration.”
So what has changed?
On the face of it – not much. Ssas schemes can still be established, transfers to these schemes are still allowed, and there is still no TPR safe scheme list.
But some things have changed.
Both HM Revenue and Customs and TPR requirements have significantly increased for those wishing to establish a Ssas and regarding ongoing reporting. While, importantly, this reduces the potential for pension fraud, it also makes using a professional trustee/administrator almost a requisite. The older readers among you will remember that this once was a requirement.
The number of professional trustee/administrators in the market has broadly remained the same, at around 50. However, this number masks quite a fundamental market shift.
None of the traditional big insurance pension providers are currently open to new Ssas business.
This means there are no household names that consumers would automatically associate with pensions available to them. Interestingly, many of the traditional big pension providers still have a self-invested personal pension (Sipp) open to new business.
With so many Ssas providers still open to new business, we can safely surmise that the traditional providers have not exited due to a lack of demand for the schemes. In addition, there has not been any significant changes in charging structures, so it is unlikely to be profitability.
But let’s keep to the facts. Ssas is a tried and tested pension vehicle and the market is still very much alive and kicking, and doing a great job for thousands of people.
The Ssas market is also the home for those looking for non-standard planning needs.
For example, most Ssas providers are able to facilitate intergenerational planning, controlling (business) assets, saving with non-earmarked benefits plus, of course, borrowing and lending.
The Defaqto database currently details 48 Ssas professional propositions from 42 providers. Interestingly, 73 per cent of the Ssas providers listed also offer a Sipp.
The Defaqto table represents, arguably, the closest there is to a comprehensive ‘list’ of schemes as it rates every Ssas in the market.