With the-cold calling ban now in force, it could be easy to assume both providers and consumers can breathe a huge sigh of relief – knowing one major avenue for pension scammers has finally been outlawed. But the reality is not so straightforward.
Small self-administered schemes have come under a great deal of pressure in the wake of scamming, with the Pensions Regulator’s executive director, Andrew-Warwick Thompson, boldly suggesting two years ago the “flagrant and often criminal abuse” of such schemes might ultimately result in them being axed.
While that idea did not take off, other potential threats have meant the challenges facing the sector have far from disappeared.
For each and every Money Management survey, we request views from participants on how the sector is operating. Often these responses are mixed, but the sentiment is unanimous when it comes to one particular theme this year: the actions of the taxman.
In an effort to clamp down on scams, HMRC has introduced a more stringent registration process, which John Dowding, technical director at Morgan Lloyd, sums up as making it “all but impossible to establish a Ssas for anyone with unwanted intentions”.
The downside to this, however, has been that the process can now take up to six months to complete, which can act as a deterrent even for those with appropriate reasons for heading down the Ssas route.
Mr Dowding says: “This is not great for a client that wants to establish a Ssas for end-of-year pension contributions or time-sensitive investment opportunities.
“The industry has offered a straightforward solution – the re-establishment of a compulsory professional trustee. This would eliminate the incidence of pension scams overnight, enabling HMRC to revise its outrageously excessive timescales, and therefore allow the Ssas market to function properly and efficiently again.”
Elaine Turtle, director at DP Pensions, concurs: “There is still an issue with obtaining approval of Ssas schemes. Although I do understand they have to make sure scammers are not using Ssas, I do hope the new Pension Scams Industry Group will be able to give HMRC a white list of providers, and [that] this will ease the time it takes for approval from genuine Ssas administrators and practitioners.”
James Jones-Tinsley, a self-invested pensions technical specialist at Barnett Waddingham, says the ban itself will only partially solve the problem.
“The two-year wait for the pensions cold-calling ban to be passed into law has witnessed tens of millions of pounds continuing to be lost to scammers, while the ban itself only criminalises the promotion of scams, rather than the scams themselves,” he says.
Both the Ssas and self-invested personal pension markets were no stranger to court drama last year, and the consequences will continue to unfold over the next 12 months. During 2017, both Berkeley Burke and Carey Pensions were unsuccessful in their respective court cases. Both of those centred on the Sipp market, but Ssas are not immune from the potential repercussions.
Meanwhile, the outcome of the battle between HMRC and Sippchoice involving in-specie contributions – where assets are used instead of cash – affects Ssas, too. Historically, companies had claimed tax relief on such contributions, but in 2016 HMRC challenged this, blocking tax relief on 26 schemes as a result. Sippchoice successfully opposed this ruling with the first tier tax tribunal, but the Revenue has subsequently launched an appeal of its own, due to take place in May.