SSASs have escaped detailed scrutiny for a number of reasons. Regulators are primarily concerned with protecting retail consumers and preventing them from accessing potentially detrimental products. However, SSASs are targeted at directors of limited companies who are likely to be viewed as more financially sophisticated than retail investors.
It could also be argued that the level of financial damage that could be inflicted by SSAS members is limited. With full flexibility requiring a maximum of 11 members, a relatively small number of people would feel the impact if an individual scheme went wrong or was operated incorrectly.
Another reason many believe SSASs have slipped beneath the regulatory radar is that there have been no widespread issues demanding attention. This is in part due to the fragmented nature of the industry. With so many small providers and each scheme a separately registered entity, any issues tend to be isolated.
Anecdotally, most problems with SSASs occur because of a lack of understanding by the trustees or the decision not to appoint a professional administrator rather than deliberate abuse. But there is always a risk with an expanding and lightly regulated product.
There is a possibility that less scrupulous Sipp providers may struggle to stay in the market due to increased capital-adequacy requirements, deciding instead to offer SSASs despite a lack of expertise. They may see SSASs as an opportunity to access quirkier investments, but Tim Sargisson, managing director of James Hay, says this is not the right approach. “It is not about an opportunity to invest in racy, esoteric investments that you can have in a SSAS structure rather than a Sipp,” he says. “We still have to undertake due diligence whether it is one or the other.”
Concerns from within
Those on the frontline have the greatest insight into concerns within the industry and the SSAS market is no exception. In this year’s survey, providers were asked to comment on the issues that most troubled them in the current environment. The results are shown in Chart 1.
The area of most concern was regulation, covering a wide range of issues. A significant number of providers – 29 per cent – said they were worried about the almost constant changes to pensions legislation and HMRC rules, highlighting the difficulties of making long-term retirement saving plans when the playing field keeps changing.
Causing almost as much concern is the prevalence of SSAS orphans at 21 per cent. Numerous providers pointed out that trustees of SSASs without a professional administrator – a role effectively removed in 2006 – were contacting them for assistance in getting their SSAS back on track, often following an error. Multiple providers called for the reinstatement of a legal requirement for a pensioneer trustee.
