The recent Department for Work and Pensions publication of the pension scams consultation response contains an important and potentially costly sting in the tail which could affect those operating a SSAS without an active sponsoring employer.
Paragraph 4.4 confirms HM Revenue & Customs will have the discretion to de-register existing schemes where there is no active employer link. This creates huge uncertainty for schemes, such as those where:
- The employer ceases to trade, or winds up, either deliberately or due to an event such as insolvency
- The sponsoring employer is intentionally removed prior to sale of the company
This could mean many thousands of pension schemes find they are at risk of de-registration tax charges, or need to transfer to other registered pension schemes in order to avoid de-registration.
Many of these schemes may unnecessarily incur costly fees in order to move investments to an alternative scheme such as a Sipp.
We do not believe the wording of the DWP response was drafted to deliberately create uncertainty and guess this discretion has been included for positive reasons such as in the above examples (assuming the Government sees the above as legitimate reasons for the absence of an active sponsoring employer). However, we would welcome speedy clarification prior to the drafting of future legislation.
This issue could simply be solved by an exception for those without an active sponsoring employer, provided the scheme has an independent professional trustee. Indeed, it was disappointing to see the Government has missed the opportunity of improving scheme compliance by not restoring the role of the professional pensioneer trustee, although one wonders whether it is keeping its options open by using the phrase “at this stage” at the end of paragraph 4.9.
Nigel Bennett is sales and marketing director at InvestAcc