To say there has been a sizeable change in pensions would be an understatement. Enough has been written about the pensions freedoms and the effect they could have on advisers and clients, but there has been much less focus on the different retirement planning options available while saving.
The small self-administered scheme (SSAS) is a foundation to retirement planning for many wishing to invest in a multitude of assets while not being as heavily regulated.
Historically seen as the more complicated sibling to the self-invested personal pension (Sipp), a SSAS is a form of occupational pension scheme run by an employer for a select number of its directors, a SSAS is a smaller and more exclusive product, where the founder of the scheme acts as the trustee, and the membership is limited up to a maximum of 12.
SSASs provide great tax benefits, and will keep those benefits regardless of what happens to the tax levels, so a scheme administrator could be key to help achieve those benefits, rather than a do-it-yourself approach where members could lose out on options.
Additionally, a SSAS is not a product regulated by the FCA, but there are rules set to be followed from the Pensions Regulator (TPR). A key element for using a regulated provider as an administrator is that the provider is accountable to the FCA.
Despite the benefits, the SSAS market has remained relatively stagnant over the years, never growing by a large amount. Claire Trott, head of technical support at Talbot & Muir, says she is still seeing keen interest in SSASs, but advisers still seem “scared” of the product, and fail to see how they are now more user-friendly than they were in their earlier years. She adds that SSASs are a good product specifically for succession planning, particularly post-pension freedoms.
Sorting out the scams
For Kevin Phillips, director at DP Pensions, pension scams are a huge issue for the industry. “SSASs are proving to be a very popular product for scammers as they are not regulated, don’t require a professional trustee and are exempt from a lot of the Pensions Act requirements. We have certainly seen an increase in transfer attempts to such schemes and this activity has the potential to seriously tarnish the SSAS industry.
“Clients must be made aware of the risks. It is for the adviser and transferring scheme to carry out detailed due diligence on the receiving scheme. That due diligence must cover areas such as the identities of the employer, trustees and other professionals, the relationship between the member and the sponsoring employer, and the investment strategy of the scheme. The recently introduced ‘fit and proper’ test that HMRC applies to SSAS administrators will go some way towards controlling this, but won’t help with the many schemes that are already in existence.”
AJ Bell’s response identified the continued use of “pseudo-SSASs” for pension liberation purposes as an issue it would like to see addressed in coming years. Anne McKenna, SSAS consultancy manager at the group, says it is “annoying” to have to suggest the schemes are linked to genuine SSASs. “It harms the market, but it can’t be denied that a common structure used for attempted pension liberation is similar to a SSAS.”
