Despite some recent negative publicity, says Paul Darvill, a well-run SSAS can be a valuable planning tool for a small business and there is still a significant requirement for this type of scheme.
We have seen a lot of press coverage and speculation in the market recently commenting on the future of small self-administered schemes (SSASs). This followed an online blog from Andrew Warwick Thompson, executive director at The Pensions Regulator (TPR), suggesting both pension transfers to SSAS arrangements and the establishment of any new SSAS arrangements should be banned.
TPR CEO Lesley Titcomb subsequently came out to state publicly this would not be the case. Although we still have no clarity on what changes will be introduced to provide better protection for the SSAS industry, what this furore has done is put SSASs in the spotlight once again and flagged up the need for a well-run scheme with experienced professionals administering it.
Typically, a SSAS would be set up and registered with HMRC by private or family-run businesses. The trustees of the scheme, also being the members, have control and flexibility over the assets and investment choices made in this tax-efficient environment, making a SSAS an attractive option for small and medium-sized businesses.
Recently published data indicates there are in excess of 30,000 SSAS currently in existence. Many of these schemes have been ‘orphaned’ of advice and are often run without the benefit of an independent (professional) trustee or scheme administrator.
Since the pension freedoms were announced by former Chancellor George Osborne back in 2015, there has been an increase in the number of schemes wishing to move provider or take on a professional scheme administrator, where the member trustees may have previously been undertaking this role themselves.
This is hardly surprising when many existing SSASs are being charged very high fees for receiving little to no service and are failing to meet the increasingly burdensome administrative requirements.
It is a real threat to the industry, as a poorly administered SSAS can incur large fines from HMRC and TPR as well as the potential de-registration of the scheme if the current scheme administrator is not deemed ‘fit and proper’ by HMRC.
This just highlights how important it is for SSASs to undertake a review. This would need to include the trust deeds and rules, HMRC scheme returns (completed annually) and TPR scheme returns, which are sent to TPR periodically in order for it to update and maintain its register of pension schemes. The review would also look at charges associated with the scheme, annual valuations and any benefit crystallisation events, as well as the investments and any loan-backs in place.
If the scheme members decide to change their current provider, it is far easier to do than many imagine. It is, however, important to make sure thorough due diligence is undertaken on any potential new provider. Have they shown a formal process for administering your scheme, and are you comfortable they have the requisite experience and are aware of all of their formal duties?
While it may not be difficult to move SSAS administrator, many providers have shied away from marketing SSASs, focusing instead on their SIPP proposition. What some advisers fail to realise is that a well-run SSAS can be a valuable planning tool for a small business and there is still a significant requirement for this type of scheme. Some of the key advantages are:
* They can be more cost-effective for multiple members of the same company, especially when a property is involved.
* They are useful for succession planning in family businesses because there is no need to earmark the level of each asset the individual holds, provided the overall share of fund levels are clearly recorded and maintained for each member.
* The older generations can potentially draw on the cash element leaving less liquid assets invested.
Taking over as a scheme administrator can be a risk, as it firstly requires a full review and those extra skills can prohibit this for many providers. There are however firms that have the technical expertise, technology solutions and administrative know-how to ease the burden when making an appointment of this nature, in bulk or for individual schemes.
Paul Darvill is administration and technical director at Talbot and Muir
The post Paul Darvill: Bulk SSAS take-overs are on the increase appeared first on Retirement Planner.