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Why a SSAS needs a Scheme Administrator

1 May 2019

Almost 1 in 3 SSAS schemes have no external administrator, yet the onerous requirements that are now in place risk the deregistration of the scheme, warns Graham Muir, director, Talbot and Muir.

The Pensions Regulator (TPR) collates data on defined contribution (DC) trusts.  The data provides a high-level snapshot of the current landscape of occupational DC trust-based pension provision in the UK, including information on the number and membership of schemes, as well as details on DC memberships of hybrid dual-section schemes.

The latest edition of this data set covers around 33,500 current schemes from the pension schemes register, with an effective date of 31 December 2017.  TPR has identified that there are around 22,000 small self administered schemes (SSASs) that have been registered with them.  Of these schemes around 28% do not have an external, professional administrator and are therefore vulnerable to tax charges and penalties for mal-administration.

Since 2014 HMRC have required Scheme Administrators to pass a ‘fit and proper’ persons test, whereby they must “have sufficient working knowledge of the pensions and pensions tax legislation to be fully aware and capable of assuming the significant duties and liabilities of the Scheme Administrator” or employ an adviser with this knowledge.

A Scheme Administrator has certain obligations by tax law and HMRC has the right to refuse to register or deregister a scheme where the Scheme Administrator is not deemed to be a fit and proper person.

The issue is that there is no definition of a fit and proper person, but HMRC did provide guidance to try and clarify what is required of the Scheme Administrator to meet the requirements.

HMRC would consider investigating a scheme when the Scheme Administrator:

• does not have sufficient working knowledge of the pension and pensions tax legislation to be fully aware and capable of assuming the significant duties and liabilities of the scheme administrator, or does not employ an adviser with this knowledge;
• has previously been involved in pension liberation;
• has previously been the Scheme Administrator of, or otherwise involved with, a pension scheme which has been de-registered by HMRC;
• has been involved in tax fraud, abuse of tax repayment systems or other fraudulent behaviour including misrepresentation and/or identity theft;
• has a criminal conviction relating to finance, corporate bodies or dishonesty;
• has been the subject of adverse civil proceedings relating to finance, corporate bodies or dishonesty/misconduct;
• has participated in or been connected with designing and/or marketing tax avoidance schemes;
• employs as an adviser a person who has been involved in pension liberation or tax avoidance;
• has been removed from acting as a trustee of a pension scheme by the Pensions Regulator or a Court, or has otherwise seriously contravened the pensions regulatory system, or the regulatory system of any other professional/governmental regulatory body; and/or
• has been disqualified from acting as a company director or are bankrupt

For advisers and other professional connections of a client that uses a SSAS to provide their pension, it is important to highlight the dangers of not having a professional Scheme Administrator.  They genuinely may not be aware of the onerous requirements that are now in place and do risk the deregistration of the scheme.

Professional Scheme Administrators and professional trustees are often brought in at a late stage and have to unpick issues and backfill documentation and scheme returns that may not have been submitted.  This is rarely due to deliberate acts of omission, but rather due to employers and members having been acting as a Scheme Administrator without sufficient knowledge to complete their duties appropriately. Previously when we have taken on the role as Scheme Administrator we have been able to resolve historic issues that would likely have caused tax charges.

It is imperative that schemes such as these are taken over by an appropriate Scheme Administrator before the scheme is deregistered. Otherwise, this could mean very significant tax charges for the scheme and the current administrator.

A review of the SSAS may show that:

• The Deeds and Rules are outdated
• Scheme Returns have not filed on time or not at all
• Rent has been unpaid
• Loanback interest and capital repayments have not been made
• Loan backs are unsecured
• Drawdown reviews have been missed
• Benefit crystallisation events have been missed and not certified

Given the extent of the issue, this is an area that adviser firms can add value to their clients and should consider talking to their professional connections to see if they have any ‘orphaned clients’ that might benefit from a review to ensure all the SSASs they are involved in are being run property.