Small Self Administered Scheme  

Govt u-turns on push for Ssas consolidation

Govt u-turns on push for Ssas consolidation

The Department for Work and Pensions has been forced to clarify that small, self-administered schemes will not be included in its push for consolidation of sub-scale defined contribution arrangements, following industry backlash.

Last week Guy Opperman, minister for pensions and financial inclusion, unveiled plans to force the consolidation of sub-scale defined contribution arrangements.

In his announcement, Mr Opperman specifically name-checked Ssas, otherwise known as relevant small schemes by the Pensions Regulator.

A Ssas is a workplace pension scheme set up by the directors of a business who want more control over the investment decisions relating to their pensions.

Each member of the Ssas is a trustee, meaning they can make their own investment decisions, including investing it back into the business.

Mr Opperman said improved scale would drive better returns but contrasted this goal against “thousands of occupational DC schemes where members are themselves the trustees", with "little more power than retail investors".

Therefore, the minister said, he would look to bring forward regulations for consultation in the spring to nudge these schemes towards consolidation.

However, the DWP has since come forward to say that Ssas will be left out of the scope of this regulation.

The DWP said: “The proposal to encourage consolidation does not include vehicles where members themselves are trustees".

Claire Trott, chairman of the Association of Member-Directed Pension Schemes, welcomed this news saying Ssas were often "too niche" a product to be included in wider regulation focused on workplace pensions.

Ms Trott said: “I don’t feel that there was a true understanding of the purpose of Ssas in the pensions market. They are very niche in the sense that they suit a certain type of investor, one that wants control and often one that wants to combine their retirement planning with their business planning.

“This should have been made clear when discussing the issue of consolidation that Ssas were not the target of mass consolidation, but as is often the case Ssas aren’t considered and the industry has to push for clarification. 

“This is likely to be the same when we do see further information released. Amps will be looking into the impact this could have on the industry, Ssas providers and members.”

Gareth James, head of technical at AJ Bell, agreed it was a positive for Ssas to be excluded from the proposals.  

Mr James said: “There are a range of regulatory requirements from which Ssas are exempt, because all scheme members being trustees means that the requirements aren’t as appropriate.

“This difference between Ssas and other types of occupational schemes is something which has been recognised in legislation for more than 20 years."

He added: “This is slightly different, because it’s a regulatory proposal rather than a requirement, but the same principle of Ssas exemption applies.  

“The proposals aren’t appropriate for Ssas, so exempting them makes sense.”

Martin Tilley, pensions director at Hurley Partners, said there appeared to be a misunderstanding on Mr Opperman’s behalf, so the clarification was to be welcomed.