Pensions  

Regulator proposes Ssas ban

Regulator proposes Ssas ban

The Pensions Regulator has urged the government to consider an outright ban on setting up small self-administered schemes (Ssas) to end the "flagrant and often criminal abuse of the Ssas regime".

The comments were made by TPR executive director Andrew Warwick Thompson as part of a broad set of reforms to crack down on pension scams.

Mr Warwick Thompson described Ssas as an "open goal" for pension scammers, and urged the government to give "serous consideration" to an "outright ban on the establishment of any more Ssas arrangements".

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He also called for a ban on transfers into Ssas.

Mr Warwick Thompson said there were probably close to 800,000 Ssas in the country, the vast majority of which had only one member.

According to current regulations, only Ssas with two or more members need to register with the regulator, meaning the approximately 750,000 one-person Ssas were almost completely unregulated.

"Why is this a problem? To begin with, Ssas are exempt from many of the legal duties designed to protect members that are applicable to larger schemes," Mr Warwick Thompson said. 

He said this lack of regulation had made them "the vehicle of choice" for scammers.

"In my view, Ssas have gone far beyond the scope of the policy intent that created them. Self-invested personal pensions (Sipps), which are the subject of far tougher regulation by the [Financial Conduct Authority], are a safer vehicle for consumers who want control over the investment of their pension pot."

Mr Warwick Thompson also called for a major shake-up of the rules governing pension transfers. He recommended that pension transfers only be permitted into authorised master trusts (regulated by TPR), or FCA-regulated pension products such as group personal pensions and Sipps.

That would rule out transferring into a single-employer trust-based defined contribution schemes, as well as a Ssas.

"That’s clean and simple, it answers the legitimate calls from trustees and scheme managers to drastically reduce the cost of due diligence with which they are burdened now, and addresses the overriding consumer need to be confident in the safety of the scheme in which they save," he said.

He also said he favoured the government's proposed ban on pensions cold calling, and supported a proposal put forward today by the Association of British Insurers to extend the ban to text messages and emails.

Mr Warwick Thompson's comments come four months after the regulator issued a warning to savers to avoid Ssas altogether.

It also comes after news that sales of Ssas fell 10 per cent over 2016.

A large number of major Ssas providers, including Mattioli Woods, Dentons, Xafinity, and Embark, have called for better regulation of Ssas, worried that the current lack of regulation would give the sector a bad name.

All the above providers also offer Sipps, which have much stricter regulatory requirements, including tough capital adequacy rules. They have told FTAdviser that as a result they are ready to to apply the same strict standards to their Ssas business.