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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



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Good article and well said Martin. They’ll have to do something and sooner rather than later.

  2. Give SIPPs the same features of SASS’ and remove the opaque, mis-used pension wrapper for good.

  3. I thought SMOPS didn’t need to register with TPR? And I can only think of one outfit that’s pushing burial plots and car parks.

  4. These articles just keep appearing every few months…Once again, we have the old SSAS industry crowing about the loss of their beloved ‘pensioneer trustee’ status.

    No. If we want to stop SSASs (and indeed SIPPs) being used for investment abuse, all we need to do is bring back restrictions on what these vehicles could invest in. These could provide flexibility for ‘self investment’ by business people with the sponsoring employer (i.e. if you were a business person, these rules allowed you to use the pension with YOUR business, not 3rd party suspect investments) whilst being pretty restrictive in what else they could invest in e.g. no UCIS, unquoted stocks or bonds, or 3rd party loans.

    Insisting that the rest of us have to put money in the pockets of Martin and his mates is an unwarranted tax.

  5. Man in Black, I’m afraid your argument does not hold water. SSAS investments are held by the scheme trustees and without an “informed” trustee able to block assets not on the “permitted list” the lay trustees would be just as able to invest inappropriately as they do now. Your earlier comment on a similar subject a few weeks back is not borne out by our experience either. Since September 2014 we have had around 30 “orphan SSAS” approach us to act as “fit and proper administrator”. Of these 90% were either in a position where a tax charge or penalty had been incurred without them realising or had been in that position within the last three years. Even using them as intended, some loans were incorrectly or not documented and some properties had no leases or were paying rent at inappropriate levels. Lifetime allowance certificates had not been issued, the list goes on. Although there may be “some” well run and managed SSAS’s without professional trustees, I’d suggest its not the majority. SSAS’s and SIPPs are more alike and the costs associated with the “old” pensioner trustees no longer apply. The costs are quite likely to be less than penalties incurred and its takes the scammers out of the game totally.

  6. I rather suspect your sample of 30 odd clients has an element of self-selection – they’re coming to you because they know you can solve a problem, and indeed explain what the problem is. But that doesn’t make them representative of those not coming to you.

    Ah yes. Scammers. “If only”, say the old pensioneer trustees, “everyone was forced to use our services, there would no scams.” “If only there was no right to a transfer value” say the old Life Offices “there would be no scams”. Both are self-interested responses that would be blunt and, frankly, ineffective.

    If we want to stop people with SSASs investing in bad investment types, a useful starting point might be to pass a law actually saying “SSASs must not invest in bad investment types”.

    At the moment, there is no such provision: whatever the restrictions on promoting unregulated collectives to ordinary retail clients, there is no law saying an ordinary retail client cannot invest their entire pension pot in an unregulated collective. There is however a law saying that ISAs cannot invest in unregulated collectives and, well, they tend not to (despite thousands of firms being eligible to apply to act as ISA Managers if they really wanted to (and HMRC seem to approve anyone)).

    Your alternative to actually banning bad investments – insisting on professional trustees to police these things (and charge their large fees for doing so) – forgets that the record of professional trustees here is actually quite poor.

    I have taken over as trustee of a small number of “occupational” money purchase schemes that were set up by a so-called professional trustee (and Solicitor to boot). There are 250 members in illiquid investments, of whom a third “invested” in an outright fraud. The basics of pensions law and scheme administration have not taken place. Yet he charged the members some £300k over 3 years for his service.

    But that’s not an isolated example of so-called professional trustee negligence.

    Where were all the pension scheme members who invested in so-called “Ethical Forestry Ltd”? In SSASs run by random inexperienced outfits? Or in SIPPs run by a firm that purports to be a professional firm of pension trustees –whose SSAS arm still has the words “pensioneer trustee” in its name? One of whose leading lights is a previous president of the Pensions Management Institute?

    Where were all the members who invested in the Bentley-Leek “investments”? In SSASs run by random inexperienced administrators? Or in SIPPs run by a firm that started life in 1982 running SSASs (as pensioneer trustees)?

    Without FCA clumsily prodding SIPP operators over bad investments, the pensioneer trustee people running SIPPs were doing no better than anyone else running SIPPs in this regard.

    When I started learning pensions 20 years ago, I remember the regular appearances of pensions lawyer and trustee John Quarrell in the pensions press. I wonder what he’s up to these days? No, I won’t name the otherwise nice pensioneer trustee found dead on the beach with a hole in one of his schemes – but I’m sure you remember him.

    I am sure there are “some” old pensioneer trustee types who do a good job. And I am sure your own firm no longer gets involved with world famous chefs and their paradigm cases of SSAS busting.

    But actually, I’m even more sure there have been plenty of new entrants into the SSAS market over the last decade whose services have streamlined and revolutionised SSAS provision. And long may those new entrants come in spite of your efforts at returning to the closed shop.

  7. As Managing Director of I have read the numerous articles by Martin Tilley from Dentons Pension Management with some interest.

    There are clearly some SSAS members, particularly those running their own schemes, who have been taken in by the blandishments of the ‘scammers’ to accept dodgy investments and who have subsequently suffered from swingeing fines from HMRC and/or loss of a large proportion of their investment. There is therefore a good case for HMRC and the Pensions Regulator to ensure that all SSAS members running their own schemes are made fully aware of which investments are acceptable and, more importantly, which are not, together with the penalties for abusing these rules. In other words a list of allowable investments needs to be drawn up. Scammers and dodgy IFAs should be investigated directly and banned.

    There is no case, however, for insisting that all SSASs are administered by slow and expensive professional trustees, when a perfectly viable, much cheaper and increasingly popular alternative is available which Martin Tilley just didn’t happen to mention – namely SSAS practitioners. generally accepts two types of client; those who have not previously had a SSAS (often because they felt incapable of running their own or regarded the use of a professional trustee as too expensive) and those who have previously used a professional trustee (and were not happy with the service or the fees, sometimes both). We receive almost no orphan SSAS applications and none from applicants who have been ‘scammed’. All our applicants for new SSASs and their companies are very rigorously investigated by HMRC. We tell new clients very clearly what investments they can and can’t make, together with the financial ramifications of the latter in terms of tax penalties from HMRC and the potential termination of their contracts with us. We provide basic management of the pension fund (initial setup or takeover, subsequent liaison with HMRC and the Pension Regulator, provision of annual reports and valuations, liaison with lawyers, general advice etc) but do not give investment advice, leaving clients to make their own investment decisions or to use their own IFAs. Very importantly of course, pension holders act as their own Trustees.

    So how does this work out in practice ?

    In our experience, the vast majority of our clients take the responsibility of trusteeship very seriously. We have a large number of clients and the number who have behaved irresponsibly over the near six years of our existence as a company can be counted on the fingers of one hand. I have no reason to believe that other practitioner operators have had different experiences.
    There is, therefore, no case for insisting that all SSASs should require professional trustees and hence a return to what ‘Man in Black’ correctly calls the closed shop.

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