Richard Mattison points out key areas advisers need to be aware of when choosing a SSAS provider
SSASs have been in existence since the mid-1970s and, despite predictions that they would be wiped out by the boom in SIPPs, they have endured, and their popularity is seeing something of a renaissance.
However, there still seems to be a kind of mystique surrounding SSAS due to the different approaches taken by different providers which means they can be difficult to assess. There is a number of simple checks that can be carried out when reviewing a SSAS to ensure it is being operated correctly and in the best interests of the underlying members.
Like all financial services products, however, they must be operated within set rules and guidelines or some nasty fines and penalties will result.
1. Who is the scheme administrator and what is the registered pension scheme number?
Each SSAS must be registered with HMRC, have a registered scheme administrator who has the responsibility for its operation and a registered pension scheme number. The administrator must have an ID and password to access HMRC online. Without these the scheme is not a legitimate UK pension scheme.
It is permitted for the scheme administrator to be a scheme member or other professional such as an accountant or financial adviser but it usually proves extremely difficult for them to keep up to date with all the requirements for SSAS operation.
2. Are all the regulatory registrations and returns up to date?
• HMRC. Returns must be submitted online every year with a deadline of the next 31 January. In addition specific reports and returns must be carried out in particular circumstances.
• Pensions regulator. All schemes with two or more members must be registered and must file regular returns. The scheme will have a scheme number and scheme key.
• Information commissioner. All schemes must register with the information commissioner as data controller. The scheme will have a reference and security number.
The scheme administrator must operate a compliance regime that protects the scheme and its underlying members. This includes a number of elements such as a business continuity plan, data security policy, professional indemnity insurance and anti-money-laundering policy.
4. Trust documentation
A copy of the governing trust deed must be available for inspection and the scheme rules must be up to date to cover current legislation being utilised by the scheme. For example, any scheme paying flexible drawdown must permit this under its rules.
5.Pension scheme banking
A SSAS is operated through a bank account and the banking is therefore the central element to its administration. Some SSASs allow the members to be sole signatory on the pension scheme bank account.
This is not a sensible approach and can frequently cause problems with record keeping, audit trails and ensuring unauthorised payments are not made. The consequences of getting this wrong could spell disaster for the scheme and care must be taken with the banking arrangements.
6.Investments and record keeping
The attraction of using a SSAS is its investment flexibility. However, it is important to stick to some fundamental rules for the administration of these investments:
• Are rental payments, leases, property insurance, loan interest or loan capital repayments up to date? All pension scheme investments must be operated correctly and be on an arms-length commercial basis to avoid unauthorised payment tax charges.
• Have full records been kept of investments, contributions, fund allocation, benefit crystallisation events and benefits paid? Accurate record keeping must be maintained at all times and records must be available for inspection by regulators.
• In whose name(s) are the scheme's investments registered? All members must be trustees and they must all agree to all investment decisions. While this does not mean they must all be registered holders of all investments, an audit trail is required to evidence their agreement.
Everyone has to pay fees but value for money is important. The fees for the operation of the SSAS should be checked. Broadly speaking it should be equivalent to the cost of using SIPPs and where this is not the case there could be an argument for moving the scheme to a cheaper provider.
SSAS are the most flexible and secure pension product available and with their abilities to invest in the client's own business their demand is on the increase. There are many thousand schemes already in existence but many also need a careful review to check they are up to date and being operated correctly.
By following these seven steps a client can be confident they are with the right provider and are not facing potential fines or penalties for mistakes they aren't even aware have been made.
Richard Mattison is director of the Whitehall Group UK
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