Last month, I was asked to speak at the Association of Member Directed Pension Schemes (AMPS) conference on the subject of the future of small self-administered schemes (SSAS), bearing in mind regulator comment on them being the “vehicle of choice” for scammers.
Despite the now infamous blog calling for a ban on SSAS, a spokesman for The Pensions Regulator (TPR) previously reported in a trade publication “the resurrection of a requirement for Pensioneer trustees would greatly reduce the risk of SSASs being a vehicle of choice for scammers” but that “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”.
While we await the Department for Work and Pensions (DWP)/HM Treasury outcome to responses to its pension scam consultation, let us examine a couple of suggestions mentioned therein.
Industry ideas
The first was the reintroduction of a mandatory body to act in a supervisory role to prevent inappropriate investment and/or fraud or pension liberation. Whether or not this should be a trustee, administrator or practitioner of some sort the question raised by TPR remains relevant. Who could this be?
It would appear that TPR wishes to rule itself out, being under-resourced for the task.
AMPS as an industry body is probably well placed with its constituent body of industry professionals, but of course, all of these have a day job and it’s not an appropriate role for them.
Another popular suggestion has been the Financial Conduct Authority (FCA) who has now, after a few years of trying, cracked down on the self-invested personal pension (SIPP) operator market.
Certainly, the principles required of a SIPP operator would sit well with a supervisory role within SSASs too.
It was interesting to see that of the respondents to questions at the AMPS conference who were practitioners, 67% offered both SIPP and SSAS. One might like to conclude that those firms would be applying a similar approach to SSASs as they are required to do for their SIPP clients.
My own conclusion is that it must be HMRC who is responsible for authorising any supervisory body and that they would need to have the necessary teeth to enforce compliance. It is, of course, the Treasury who are the next biggest losers after the clients when pension funds are lost to scams.
It was also interesting to see that of those respondents offering SSAS services, 98% were acting as professional trustee of the scheme and as such should have been in a position to know about, comment on and block any inappropriate action.
Indeed returning to the FCA’s regulation of SIPPs, they require not only the ability to identify inappropriate investments but to have systems and processes in place to prevent them from being made.
Sadly, however good a practitioner only model is, and there are some very reputable ones in the market, where they do not act in a capacity so as to be able to prevent events before they occur, potentially bad investments can be made and closing the door after the horse has bolted will not get the horse back in the stable.
Alarm bells
The second suggestion was a ban on transfers to SSAS, or alternatively a list of “safe schemes”.
We have already seen the actions of several large pension administrators and insurers in determining whether a scheme is registered and therefore one would hope it is recognised as a “safe scheme” before transfers will be made and transfers to SSASs will, of course, be ringing the alarms most loudly.
It might be that if this approach is adopted, a “safe SSAS” might be one that has appointed a recognised and perhaps regulated supervisory body.
However, while that SSAS may be safe at the point the transfer is made, the subsequent removal of that body immediately after could still allow scam investments to be made or liberation to occur.
It would appear that if the authorities are serious and “enough is enough”, the only way to prevent these scams occurring is to enforce a compulsory non-removable supervisory body. If this is the outcome, the challenge will then be to make this role as streamlined and efficient as possible so as to allow the schemes to work without the cumbersome systems and costs of old.
Martin Tilley is director of technical services at Dentons Pension Management
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