Pensions: SSAS due diligence
6 August 2020
Stephen McPhillips, technical sales director, Dentons Pension Management Limited, provides practical tips for paraplanners needing to conduct due diligence on SSAS providers
When reviewing a client’s existing small self administered scheme (SSAS) scheme / provider or deciding upon a new provider to select for clients, there can be some overlap with the considerations for self invested personal pensions (SIPP), but there are some additional factors to take into account. This is because of the differing legal structures of SSAS and SIPP.
Some key factors to consider might be:
- Does the SSAS provider offer a full, hands-on service which encompasses co-trusteeship (along with the SSAS member trustees), joint Scheme Administrator duties and joint signatory to the SSAS trustee bank account? Contrast this with a “practitioner-only” provider which does not take on the legal, and HMRC, responsibilities involved in full service propositions. Bear in mind that clients might assume that the financial adviser firm is responsible for some of the functions that are not being legally undertaken by the practitioner-only offering.
- Does the SSAS provider offer to undertake due diligence on any existing or proposed SSAS investments free of charge and without obligation prior to being appointed? For existing SSAS, does the provider offer a facility to review the scheme and highlight any potential issues with it – again, free of charge and without obligation?
- Will the SSAS provider quote an estimate of likely initial and ongoing fees in advance, so that the adviser firm and clients can make accurate cost comparisons and hence an informed decision?
- Does the SSAS provider calculate the fund allocation (split of fund between the members) routinely and communicate this to the members at least annually? If not, who is made responsible for this potentially complex calculation and how can the adviser firm conduct any cashflow modelling for the members if the correct fund split is not available to hand?
- Does the SSAS provider offer some facilities that appear to be out of line with the vast majority of the market, for example, pushing boundaries around tax planning, and, if so, why? Is the adviser firm comfortable with a provider that seems to swim against an industry tide and its need or reasons to do so?
- What levels of service does the SSAS provider offer to advisers and clients? Does it, for example, allocate a named and dedicated multi-skilled administrator who takes responsibility for all aspects of day-to-day administration of the SSAS – including investments, benefit crystallisation, event calculations and so on?
- Will the SSAS provider assist the adviser firm with technical help and support around complex industry matters such as the Annual Allowance (AA), Tapered AA, Money Purchase AA, Lifetime Allowance and Protections against it and so on?
- Is the SSAS provider well-resourced in general and does it operate a profitable and sustainable business model?
- What are the SSAS business owners’ plans for the future? Are they committed to the market with an aim to grow the business, or are they looking for an exit strategy?
- If the SSAS provider also has a SIPP operation, what is its Capital Adequacy position and what are its plans for the SIPP operation?
- What is the provider’s exposure to non-standard assets such as UCIS and what is its due diligence process for asset acceptance?
- Does the provider have a nationwide network of sales professionals on-hand to assist paraplanners and advisers with enquiries and also on-hand to assist with joint client meetings?
Answers to all of the above questions should help to enable paraplanners to assess the strength, quality and reputation of a SSAS provider.