Department for Work and Pensions (DWP) has to bring in urgent reforms to ensure SSAS schemes are not penalised by new requirements under the Pensions Act, says Rowanmoor Pensions.
New pensioners could face a substantial drop in income due to new regulation which means money purchase schemes, including SSAS, which offer scheme pensions will be classified as defined benefit schemes.
Under the Pensions Act, pensions paid by defined benefit arrangement must increase by limited price index (minimum of CPI and 2.5% for benefits accrued after 2005) each year.
While the DWP has said it will bring in regulations to mitigate this until that happens new SSAS pensioners could see a drop in income-possibly below capped drawdown levels.
Managing director of Rowanmoor Pensions, Ian Hammond also warned unless reforms are bought in to exempt SSAS: "the Government will find itself creating an unsustainable bureaucracy, which is open to continual, rightful and ongoing challenge by the industry"
Hammond added: "We have taken legal advice and despite early indications from the DWP that there was no intention to negatively impact SSASs, this has yet to be clarified. Until we are reassured that this is definitely the case, we will quote SSAS scheme pensions on this basis, which may mean lower benefits for some new pensioners. For those already in scheme pension, a level pension will be continued to be paid until we see the regulations.
"Whilst we understand the main purpose of the amendments is to strengthen the protection offered to members of larger group pension schemes the needs of SSAS members must be protected. As it stands, the Act penalises SSAS, whilst SIPPs can continue to offer scheme pension on a level basis, as they are not occupational schemes under the Pensions Act. This contradiction must be addressed."
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