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Third of SSASs still fail to meet A-Day regime

One-third of small self-administered schemes have yet to adopt A-Day reforms and face a 40 per cent tax charge and deregistration if they fail to implement the rules by next April, warns Hornbuckle Mitchell.

In April 2006, the Labour Government brought in a series of fundamental changes which were designed to simplify pension tax rules.

A single tax regime was introduced to replace the previous eight and schemes were given five years to comply with the reforms.

With the deadline for compliance now less than five months away, Hornbuckle Mitchell director Mary Stewart believes that around a third of Ssass have yet to adopt the changes that need to be in place by next April.

She says employers running “orphan” SSASs are less likely to have made the necessary arrangements to comply with the new rules.

Failure to adhere to the rules once the deadline has passed could see schemes incur a 40 per cent tax charge on the market value of scheme assets and face deregistration.

Members of a non-compliant Ssas could be subject to restrictions and tax charges on their contributions, retirement options and final benefits.

Stewart says: “Since A-Day, an awful lot of Ssas administrators have resigned from the market, so there are a lot of orphan Ssass out there which do not have a professional trustee or an administrator.

“A lot of people do not realise they have got these obligations and that they have got to comply with these rules or face deregistration or heavy tax penalties.
“We have found that, with requests for transfers in that we have had, about a third are not compliant.”

Worldwide Financial Planning IFA Nick McBreen says: “For a lot of firms, trading has been difficult since A-Day and they have focussed on other things, so this could come back and bite them. It is a problem where companies look at the benefits of a scheme like an SSAS but do not review them as often as they should.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. The few SSAS’s with which I became entangled in what is now the fairly distant past were all major league pains in the backside for one reason or another and I’ve never sought to become involved with them ever again.

    Doubtless some specialists will claim that the things that can be done with SSAS’s and SIPP’s render them the best things since sliced bread. But f% of ordinary people who have little or no understanding of the complexities involved ~ made progressively worse throughout Labour’s 13 years of office ~ I really wonder if they’re worth the extra costs and hassle and risks, particularly at a time when pensions in general are more than ever in need of true simplification.

    Just this morning, I attended a presentation updating us all on the latest NEST developments. Apparently, there’s going to be a choice of FOUR definitions of pensionable earnings, with different obligatory contribution rates applicable to each. And this is for a scheme that the government’s claiming to roll out as a simple, low cost, universal solution for all and sundry who aren’t yet savng for their retirement.

    Why not just be honest and say to the country that the S2P is going to be replaced by a more or less compulsory private sector alternative and that all employers must have in place by no later than 31.12.12 a money purchase scheme based on emplorer cont’s of 5% of gross weekly or monthly earnings and that members must contribute 3%? The whole NEST thing is just a red herring which most employers may well be well advised to avoid.

  2. While it is certainly good practice for SSAS to keep their scheme rules up to date, my view as a solicitor specialising in such work is that this article oversimplifies the position and risks causing unnecessary alarm.

    It is very unlikely indeed that any SSAS-type scheme will lose registered status merely by virtue of having pre-A-day rules in place on 6 April 2011.

    Providers remain caught in a dilemma until HMT tells us – apparently on 9th December – whether it will press ahead with income withdrawal changes from 6 April 2011, or delay by a year.

    It may not be cost-effective for SSAS clients to update their schemes in the meantime with rules that do not anticipate those changes.

  3. I dissagree Julian these tools give greater freedom to the savy investor and if clients don’t understand them or are wrongly prescribed them you have to look at the advice! Simpoly saying it is easier to follow the crowd because these products are troublesom is a sad reflection of the advice market today. We should be proud to give advice on all matters fiancial stop running scared stand up, and be counted.

  4. As Nick White has pointed out, this is scaremongering presumably aimed at driving IFAs to push more of these ‘old rules’ SSASs in Hornbuckle’s direction.

    Having old rules does not mean the scheme will be de-registered. No tax penalties will be applied.

    Breaking the rules, be they old or new, is what gets a scheme de-registered. And frankly, members are just as likely to ignore/abuse the new rules as they are the old ones.

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