HM Revenue & Customs (HMRC) increased the administrative burden on new schemes in an effort to combat scams, so setups can take much longer than expected, according to Dentons Pension Management director of technical services, Martin Tilley.
He said HMRC made “considerably more” checks on new schemes as part of its “check and register” arrangement before formally registering them.
The scheme bank account cannot be established until formal registration has been received, so no contributions can be made before this point.
Mr Tilley said: “Even where the answers to HMRC’s questions are returned immediately, our experience is that new Ssas are still taking between 2-3 months to receive formal registration so we are already at the edge of the period where formal registration might reasonably be expected.”
Many corporate clients have their year end at 31 March or 5 April, meaning applications should be made within the coming weeks at the latest, he said.
HMRC changed its process for new pension scheme registration applications in 2013.
Since then applications have been fully risk assessed before a decision is made on whether or not to register the scheme.
The Finance Act 2014 also contained a number of changes to combat pension liberation, including new powers to enquire into new registrations where HMRC suspects the scheme is involved in liberation.
In a typical application process the administrator will make an application for registration online, which is then countered by HMRC with a specified list of questions which must be fully answered before they will grant formal registered status, Mr Tilley said.
Only once the scheme has been formally registered can contributions be made to it.
Mr Tilley urged advisers to put in place contingency plans such as making the intended contributions to clients’ existing arrangements or to prepare to establish self-invested personal pensions (Sipps) to receive the contributions as a holding vehicle from which transfers can be made to the Ssas once it has been formally registered.
He said Dentons had seen three cases where it had to arrange multiple Sipps for members because the Ssas official registration had not come through in time.
“We are regularly contacted within three months of a company year end and alternative arrangements to accept the contributions have had to be made.
“It’s a year round problem but more relevant now as a higher proportion of companies have year end around the fiscal year end,” he said.
The reason a Sipp is a lot quicker to set up is that it is constructed under a master trust arrangement, meaning it is considered a sub trust of an already registered trust and abiding by the all of the conditions of that trust.
A Sass on the other hand needs the creation of a brand new trust and must be individually registered.
HMRC said registrations can take longer than three months but businesses are given the right to appeal if they exceed the time period of half a year.
A spokesperson said: “Contributions to pension schemes will only receive tax relief if they are made to a scheme which is registered for tax purposes.
“There is no time limit on how long it takes to register a pension scheme. But if it hasn't been registered by HMRC within six months, the administrator can appeal to a tribunal as if we'd refused to register it.”
Kusal Ariyawansa, chartered financial planner at Manchester-based Appleton Gerrard, said it typically took about four weeks for a provider to set up a Ssas but the HMRC rules should spur people into action.
"If a Ssas is the final intention then you could make a transfer from an existing scheme or implement a new scheme for that purpose.
"This would impact on the time, cost and compliance burden so the key would be to plan for such schemes way in advance," he said.
carmen.reichman@ft.com
