Providers who have resigned as scheme administrators of pension schemes may not only be leaving members to "fend for themselves", but could be leaving IFAs open to compensation claims if things go wrong, warns Rowanmoor Pensions.
A helpsheet outlining the responsibilities for scheme administrators, issued last week by HM Revenue & Customs, suggests the department is concerned some people have taken on the role of scheme administrator without understanding what it entails.
In the two-page document HMRC highlights the legal responsibilities of a scheme administrator including:
- Completing a declaration for each scheme for which they are administrator
- Filing the following returns without notice: Annual Event Report, Quarterly Accounting for Tax, Notification of Cessation of Scheme Administrator and Scheme wind up;
- Filing of forms served by HMRC including: Annual Registered Pension Scheme Return, Annual Audited Accounts and any other documents they may require
It also warns a pension scheme with no administrator may be deregistered and subject to a substantial tax penalty, while the administrator may become liable for charges if they fail to provide information required by a notice or the legislation; they provide incorrect information; they do anything forbidden by the legislation; they fail to keep records; or the scheme makes an unauthorised payment.
As a result David Seaton, director of consultancy at Rowanmoor Pensions, says the role of the scheme administrator is “onerous and fraught with dangers for the inexperienced”, and it seems HMRC is concerned many may have taken on this role unknowingly and totally unaware of the legal liabilities they undertake.
And he points out research conducted during the firm’s roadshows on Small Self Administered Schemes (Ssas) at the end of last year supports this view, as a survey of advisers revealed 30% have clients who act as scheme administrator for their Ssas, but 81% of these fail to understand the implications involved.
Seaton says every scheme must have a professional scheme administrator to protect the members, their pension funds and the other advisers, so he says he is “alarmed” at the number of providers who have resigned this post “leaving the members to fend for themselves”.
His comments refer to the decision in February last year by a number of providers, including Aegon Scottish Equitable; Clerical Medical; Norwich Union; and Equitable Life, not to act as scheme administrators or practitioners for Executive Personal Pensions (EPPs) after A-Day.
Seaton warns: “It is a recipe for disaster for both the members and their advisers. Most surprising is that some life assurance companies have been prepared to walk away from these liabilities.”
As a result, he says Rowanmoor insists on being the scheme administrator, in order to protect the members, the trustees and the IFAs who advise the schemes.
Seaton warns: “It will only be a matter of time before a scheme falls foul of the complex rules and suffers a huge tax penalty. The likelihood is that if there is no professional Scheme Administrator, the client will look to his IFA for compensation.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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