Stephen McPhillips, technical sales director, Dentons Pension Management Limited, looks at why a SSAS would need a professional trustee’s involvement and how to appoint or replace a trustee when needed.
Small self administered schemes (SSASs) seem to be enjoying something of a renaissance these days. That’s good news for those clients for whom a SSAS is the most appropriate pension vehicle to meet their needs – be it for a SSAS loan to employer, commercial property acquisition, flexibility, economies of scale, all of these combined and so on. SSASs have certainly stood the test of time very well since they began to evolve in one form or another from 1973, which was the year in which company directors were first permitted to make pension provision for themselves in an occupational pension scheme.
Such was the popularity of SSAS that, in 1979, the then Joint Office of the Occupational Pensions Board and Inland Revenue Superannuation Funds Office issued a Memorandum (number 58) which laid down a framework for the operation of these types of schemes. This framework included some restrictions on the types of investments that could be made (effectively preventing the purchase of assets such as fine wines, works of art, racehorses, classic cars and so on) and it also included a requirement for SSAS to have an independent professional trustee (which was termed “pensioneer trustee”), whose role it was to ensure that the scheme was only ever wound-up in accordance with its Trust Deed & Rules.
The introduction of “pensions simplification” (A-Day) on 6 April 2006 marked the end of the requirement for a professional trustee to be attached to a SSAS.
SSAS trusteeship since April 2006
Upon the removal of the requirement for a “pensioneer trustee” some clients decided to dispense with the services of a professional trustee and to “go it alone” with the day to day administration of the scheme.
Some professional trustees decided to resign from their roles, perhaps seeing an opportunity to walk away from what they viewed as onerous responsibilities that can come with acting in that capacity. Sadly, and recently, we’ve seen a well-known life and pensions provider step away from the market, leaving its SSAS clients to find a replacement or to fend for themselves.
Some providers of SSAS began to offer a new type of service – “practitioner-only” – whereby they took no official roles/responsibilities (such as co-trustee, joint signatory and joint Scheme Administrator) in relation to the scheme, but instead, provided simply a “hands-off” oversight facility. Incidentally, the appointment of a Scheme Administrator is a requirement of Finance Act 2004 for all Registered Pension Schemes, and is itself part and parcel of pensions simplification.
Some professional trustees continued to provide a full “hands-on” service to existing and new clients, and continue to do so to this day.
Why would a SSAS need a professional trustee’s involvement?
For new SSASs (and even for some existing ones), it might be a requirement of the provider of the SSAS trustee bank account that a professional trustee is involved before a SSAS bank account can be opened (and into which pension contributions and/or pension transfers are paid).
In addition, readers will be very familiar with the ever increasing complexity of the pensions landscape. This presents an ongoing challenge to pension providers and advice firms, let alone lay trustees who, realistically, cannot be expected to be fully conversant with pensions legislation; aspects such as the annual allowance and the nuances around it, lifetime allowance and the various forms of protection from it, benefit crystallisation events, HMRC reporting, new pension transfer regulations and so on.
However, without a professional trustee’s involvement in a SSAS, these are exactly the types of tasks that lay trustees would be responsible for. They might expect some/all of these tasks to be undertaken by their adviser firm (if they have one). It’s unlikely that the adviser firm would want to be responsible for all of these.
Depending on the services offered by a professional trustee, some/all of the onerous tasks listed above might be taken care of so that the lay trustees (and their advisers) can have peace of mind that the scheme is being administered efficiently and professionally day to day.
How easy is it to appoint/replace a professional trustee?
If a SSAS is currently operating without a professional trustee, it may be possible to have a professional trustee appointed to it. In doing so, the scheme continues to operate, albeit with the new trustee’s involvement. Good practice would dictate that an incoming professional trustee should undertake due diligence work on the scheme (a so called “health check”) prior to accepting the appointment – just to ensure that there are no issues that would cause difficulties for the appointee.
Similarly, if there is currently a professional trustee in place, that trustee could be replaced, subject to the due diligence work mentioned above. The speed at which this process takes place largely depends on the cooperation of the outgoing professional trustee (if applicable) and the lay trustees. Ideally, the “takeover” of a SSAS would only take a few weeks/months, but it can take longer in some cases.
In the case of new SSASs, the professional trustee is likely to supply the necessary paperwork to establish the scheme (Trust Deed & Rules, Member Application forms, and so on), and to undertake to apply to HMRC for its acceptance and registration.
Whether it’s a new SSAS or a takeover of an existing one, the market for these remains buoyant – decades after they first evolved.
