Andrew Roberts, Partner at Barnett Waddingham, writes for Investment Sense:
There are 5,000 people out there waiting for your help. This is the number of Small Self Administered Schemes (SSASs) revealed by HMRC to be struggling with the (not so) new pension rules. And for every SSAS, there will be one person ultimately responsible, though they might not know it.
That person needs your help, if you can find them.
They could well be an existing client, with both of you oblivious to a situation gifted to you by a provider who has walked away from their professional trustee role.
Urgent help needed
These SSAS clients, many of whom will be running successful businesses, need urgent help as tax charges and penalties could be building up. HMRC take a particularly dim view on those who try to correct matters only after intervention by HMRC. They are much more lenient if action is taken in advance of any investigation, so it’s better to grasp the nettle.
The difficulty for you is that SSASs have been off the radar since the surge in SIPPs, and so you may have lost some confidence in dealing with SSASs. You may not even have experience of dealing with SSAS which would not be surprising if you entered the market place after 2005. The temptation is to transfer SSAS clients to the more familiar surroundings of a SIPP, but this can bury regulatory issues that need addressing, be a missed opportunity for the client or simply an unnecessary step; you can usually invest and advise as you would in a SIPP without having to effect an often costly transfer.
Now is an opportune time to brush up on your SSAS skill set and impress your clients by taking a proactive approach to managing their SSAS. Reminders of the imminent filing deadline (31 January 2013) are arriving through the post.
Of course many of the 5,000 SSASs will be orphans of the new pension regime. Abandoned by insurance companies who did not want to carry on with trusteeship beyond April 2006, we often see business owners who are unaware that their company has become the scheme administrator and responsible for the proper management of their scheme and liable for tax charges and penalties for any deviation or omission. Even worse, we suspect that there are schemes out there that are unknown to the Revenue.
Advisers should take action
So the first action point is for any adviser with business owners among their client base to double check what pension schemes there are and who is legally responsible for their administration. This is the “Scheme Administrator” role.
You may need to check that the scheme is correctly registered with HMRC online and has a designated Scheme Administrator. This would usually have to be done by the trustees or sponsoring employer of the SSAS, who can make contact with the pension schemes section of HMRC on 0845 600 2622.
If the SSAS has been ignored for a number of years, then it is likely that corrective action is required. Delaying will only make matters worse when HMRC catch up with the scheme.
10 key questions about SSAS administration
There are a number of key tasks that need to be done and a number of key indicators as to whether a SSAS is being administered in a good fashion. To help with this, I have created a list of ten questions which you can run through with your SSAS clients to get an idea of how the scheme is faring. The questions take the form of an online questionnaire which you can access by clicking here. Tips are given as you progress through the questionnaire and at the end the results can be emailed to you and your client.
So the second action point is to run through the online health check with your SSAS clients. There is no charge for this service and no personal or scheme details (other than basic contact information) needed.
Finding out which clients have schemes and whether they might be one of the 5,000 at risk is a great opportunity for advisers to provide a valuable service. But there are much broader opportunities presented by SSASs, which are increasing in popularity, often because of their differences to SIPPs.
The key difference is that a SSAS is a standalone scheme and so is controlled by the member trustees who can decide how they run the scheme, in line with legislation. They are often helped by a professional trustee or consultant to the trustees. Whilst both roles are expendable, it is usually recommended to have a
SSAS expert on hand to guide them. Crucially, investments do not need to be disturbed to change the consultant and only simple re-registration is needed if there is a change in trusteeship.
This format of the SSAS, which is regulated by The Pensions Regulator rather than the FSA, allows member trustees to take a less restrictive approach to investment and so property purchases rejected by SIPP providers could be accommodated in a SSAS, non-mainstream investments can be accommodated and no investment provider restrictions meaning that any bank, any platform and any discretionary fund manager can be used.
Small businesses are struggling to access credit and SSASs can provide sensible loan finance, often when a bank is refusing to do so. This is not possible from SIPP funds. There are a number of criteria which must be met and it must always be remembered that the SSAS’s objective is to gain a suitable return for the members, not provide cheap finance to the company.
SSASs offer many other opportunities familiar to SIPP investors, such as the ability to accept protected rights (since 6 April 2012 for SSAS), commercial property investment, connected party transactions, in specie contributions, unquoted shares and more. Managing a SSAS can be challenging but also rewarding for all concerned.
So the final action point is to review your client base to discover who would benefit from using a SSAS structure for pension saving.
Andrew Roberts is a Partner at Barnett Waddingham and Chairman of the Association of Member-directed Pension Schemes (AMPS).