The role of trustee has become more complex in recent years. Caitlin Southall, Head of SSAS proposition at WBR Group, explains what undertaking the role entails and the accountability involved.
A SSAS offers a unique opportunity to directly marry business and retirement goals for SME owners and business directors. There are several features that support this, including the opportunity to loan monies back from the SSAS to the company, and to purchase business premises in a tax efficient way.
The tax efficiencies and wide range of investment options offered by a SSAS is underpinned by effective governance and active guardianship. Those responsible for the delivery of these controls are the trustees.
There are two different types of SSAS trustees: professional and member. Professional trustees are independent and appointed in addition to the member trustees, providing expert support on compliance with regulations and rules. As of 2006, there is no requirement for a professional trustee when setting up or running a SSAS.
Members may not fully understand the obligation and duties that they are taking on when they commit to becoming a scheme trustee. It’s vital that clients understand the responsibilities that they are taking on when becoming a trustee in order that the opportunities presented by a SSAS are maximised.
When a SSAS is set up, members will also become trustees of that scheme. It’s vital that due consideration is given to who the members of the SSAS will be, as all scheme decisions made by the trustees must be unanimous. The structure of a SSAS is defined by the pooled funds and collective investment strategy. Whilst there are circumstances whereby certain assets can be earmarked for some scheme members, this should be treated as the exception, not the rule.
Who can be a member trustee?
There are certain cohorts of people who are automatically excluded from becoming a member trustee. This includes minors, disqualified directors and anyone convicted of an offence involving dishonesty or deception. In effect, anyone who cannot be expected to discharge their fiduciary duties as a trustee.
Any trustees must warrant that they have the relevant knowledge and understanding to perform the role, within 6 months of their appointment. This relevant knowledge includes an understanding of pensions, the laws that pertain to them, and the principles of pension funding and investments.
There are free resources that support people becoming effective scheme trustees. The Pensions Regulator provides a free online ‘Trustee Toolkit’ which is designed to give new trustees core information to plug any knowledge gaps on how to effectively discharge their obligations as a trustee.
The consequence of people becoming trustees without suitable knowledge or education is poorly run schemes. Those who are ill-equipped to meet their fiduciary duties are likely to make decisions that will negatively impact the SSAS and therefore are less likely to meet the goals of the scheme members.
Responsibilities and duties
Trustees are required to act as guardians of the scheme, discharging regulatory, legal, financial, administrative and compliance responsibilities. It’s important to note that all trustees of a SSAS have a fiduciary duty, which they must comply with under law.
The responsibilities of a SSAS trustee include ensuring adherence with the trust deed and rules as well as HMRC regulations and compliance with all applicable laws including the Pensions Act 2004 and Finance Act 2004. Trustees also must ensure impartiality, which can be a tricky concept as the trustees are also scheme members and may also be owners and/or directors of the company (when employer related assets are in play). It’s prudent for there to be a defined conflict of interest policy or process at the establishment of the scheme so that all members are aware of their responsibility to disclose any conflicts of interest and how such a situation should be handled.
Trustees must act prudently, honestly and responsibly, making sure that the investment strategy for the scheme is designed and updated as required to meet the goals of the SSAS, as well as avoiding a lack of liquidity and concentrated investment risk.
Trust law
As well as complying with HMRC regulations and the terms of the trust deed and rules, trustees also have a requirement to comply with trust law. In simple terms, the trust law requires that the scheme is run prudently, with appropriate administrative measures in place to protect the scheme and its’ members. This includes effective documentation of events such as the appointment of professionals (which may include a professional trustee), financial records and statements and the arrangement of any contributions.
Trustees should co-ordinate effective communication amongst the scheme members – remember, all decisions relating to the SSAS must be unanimous amongst the members.
In reality, those obligations placed on member trustees are to ensure that their investment is run correctly and in accordance with the rules, so it is in their best interest to comply with their duties. However, it’s an important conversation to have with clients early in the process so that they understand and can appropriately discharge their responsibilities and avoid issues later down the line.
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