Martin Tilley: Time to tighten the rules on SSASs

Martin Tilley

Earlier this month, we were contacted by someone enquiring about our SSAS trustee and administration services. The individual in question explained he was receiving a pension from his previous employer’s scheme but also had an undrawn Sipp invested in regulated assets to the value of around £200,000.

He did not need the funds for retirement income and was intent on leaving them to his children instead.

He had been cold-called and told his regulated investments had not performed well lately. The caller said better returns could be achieved through a combination of investments, including burial plots and car parking spaces. He recognised these as unusual investments but was happy to go ahead with them, having been sent some promotional literature that reflected a really good opportunity.

His call to us was not to ask for an opinion on the investments but as to whether we could act as his SSAS trustee, as the one the investment promoters were recommending had only been set up less than a year ago. He explained he was no longer working and the investment promoter had even offered to set up a company for him which would be the sponsor of the SSAS.

That such a practice can still be achieved in this day and age is deplorable and the fact there are still masters of such skulduggery, exploiting loopholes to prey on the unwary, is scary. However, it does ram home the point that something needs to be done to tighten the controls in place on SSASs.

Many commentators have suggested SSASs be regulated by the FCA, similarly to Sipps. The providers of Sipps are now accountable to a far higher degree for the assets they accept but also, more crucially, for the sources from which their business originates. So much so that the purveyors of junk investments are now plying their trade through the less regulated SSAS route.

SSASs have a regulatory body already in The Pensions Regulator, so why can it not get on top of this issue? The answer is probably easily summarised as resources. TPR has a finite financial budget and thus limited personnel resources. There are estimated to be over 50,000 SSAS schemes in existence and if each were to average three members, the total membership would still fall short of some of the larger single employer schemes TPR has to deal with. Although the sums involved in SSASs per individual member are most often larger than in workplace schemes, they still pale into insignificance in the grand scheme that is total UK pension provision.

But this is of little consolation to those tricked into switching their pensions into SSASs and who subsequently lose them to investment scammers or liberation attempts, most of which result in hefty tax charges.

HM Revenue & Customs has attempted to halt the problem by insisting on the “fit and proper administrator” requirement from September 2014. However, this is easily sidestepped. Scheme trustees simply have to employ an individual or corporate body that meets this requirement. There is no compulsion for this party to be a scheme trustee and thus they would have no role in determining if an investment could or should be made.

The previous role of the pensioneer trustee could have been adapted to have fulfilled such an oversight role had it not been eliminated in 2006.

TPR has acknowledged this month that “the resurrection of a requirement for pensioneer trustees would greatly reduce the risk of SSASs being a vehicle of choice for scammers, who often market them as ‘products’ offering esoteric investments and unrealistic returns”.

But it added: “For pensioneer trustees to truly mitigate the risk of small schemes being used as scam vehicles, careful thought would need to be given to the approval and regulation of those trustees, and the capacity of a suitable regulatory body to take on that task.”

But a template for this already exists. It is the principle based approach adopted by the FCA which now applies to operators of Sipps. If TPR could just borrow this from its neighbour regulatory body and require professional trustees of SSASs to sign up to the standards, then the majority of their job would be done.

Martin Tilley is director of technical services at Dentons Pension Management