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Working together to save SSAS

24 June 2018

Zachary Gallagher, chairman, Association of Member-Directed Pension Schemes (AMPS) reports on its annual conference, one of three fixtures in the AMPS diary along with the Compliance & Technical Seminar and the Annual General Meeting. 

The annual conference concentrates on broad topical subjects facing both the financial services industry as a whole, as well as the part of the industry inhabited by the AMPS audience, i.e. those types of pension scheme whose members determine and control the choice of investments: small self-administered schemes (SSAS) and self-invested personal pensions (SIPP).

Presentations were drawn from a range of industry experts. Subjects addressed this year of broader industry interest included the proposed joint strategy for pensions as instigated by the Financial Conduct Authority and The Pensions Regulator; Brexit and its implications for UK financial services; the technological possibilities of Blockchain, and the continuing controversy of member-instigated transfers from the British Steel Pension Scheme.

On matters local to AMPS members, the conference heard presentations on the enduring appeal of SSAS to directors of owner-managed businesses, and on the attention on regulated operators of SIPPs in the context of member-chosen investments whose performance might not have met the hopes of those members.

Claire Trott of Technical Connection Ltd gave a presentation which explored the history of SSAS, dating back to the 1970s, and its recent exposure to elements of the Government’s consultation intended to rid the pensions industry of ‘scams’.

Member control of pension scheme investments is a great thing for those who have a clear idea of how their pension schemes can be tailored to suit them; those of us who work in SSAS could cite many examples of successful retirement-planning strategies helped by, for example, reliable income from commercial properties, well-chosen portfolios of stocks and shares, and secured loans to strong commercial enterprises. Those investments often involve the sponsoring company of the SSAS, such as through the letting of SSAS property to that company.

The downside of member control is that, in the wrong hands, it can lead to poor choices.

SSAS has attracted negative attention through a perception that SSAS has been ‘sold’ as a means of promoting investments. As a type of occupational pension scheme, a SSAS needs a sponsoring employer. Although historically this meant that SSAS would be chosen by directors of established trading companies with profits ready to be put into SSAS as contributions, the breadth of the legal definition of occupational pension scheme has allowed SSAS to be set up under less settled structures, such as dormant companies.

Whilst there is nothing inherently wrong in this from the perspective of what is or is not an occupational pension scheme, the government consultation on pension scams shows that there is concern that the ‘sell’ of a SSAS sponsored by a dormant employer could be used to promote investments that might not be right for the target buyer.

The Government therefore proposes to limit the statutory right to a pension transfer, in a way that would exclude as recipients those schemes whose employer had been dormant for a month or more in the previous twelve. This is coupled with an already stricter, and therefore unavoidably slower, set of criteria on which HM Revenue & Customs (HMRC) will consider an application for registering a new occupational pension scheme.

The reaction of the AMPS audience at the recent conference showed that there is great appetite for working with Government and with HMRC to make SSAS work for those whom it was intended to serve, and for improving confidence in SSAS for its practitioners and for its members.

Mandatory professional trusteeship served SSAS well until Government removed this requirement in 2006; AMPS members have since consistently shown their preference for restoring it.

The fight against pension scams might never be truly won, but there is plenty that can be done to help reinforce the industry’s defences. With developments pending in anti-scam legislation and in the joint strategy for pensions being developed by the Financial Conduct Authority and The Pensions Regulator, now seems a good time for those prospects to be furthered.

Our conference demonstrated that our members have the will to give full support to this.