Intellectual Property – not that clever?
We got a bit of publicity in the trade press a couple of years ago with a call for SSASs to be regulated like SIPPs, and as time goes on this is looking to make more and more sense.
There has been a spate of companies setting up SSAS-only operations recently and I wish them luck, SIPPs are still very much the flavour of the month and a SSAS is a harder sell, though undoubtedly the better product in some situations. The point which worries me in all this, though, is the suggestion in some quarters that SSASs are better because they aren't regulated and can do things which a SIPP operator might be nervous about, and I'm talking about non-standard investments in particular.
This can be all the investments which many a SIPP operator wouldn't touch with a bargepole because of warning noises from the FSA, e.g. landbanking schemes, life settlement funds, risky UCIS investments. A SSAS isn't on the FSA radar, so why not transfer your SIPP to a SSAS and make all these investments with no-one interfering in what you get up to?
Well, the FSA might not be interested but SSASs are still regulated by HMRC and they might have views on some investments. A particular example is intellectual property, and the purchase of it by a SSAS (or a SIPP in some cases). The deal is usually that the SSAS buys the company's "intellectual property" (this might be its logo, or domain name or brand) on the back of a valuation saying it is worth lots of money, and then leases it back to the company for an annual "rent".
Now if you are a global business your brand might be worth lots of money, but if you are a small local tradesman your intellectual property possibly isn't worth much, and not the amount it has been transferred to the SSAS for. A cynic (who me?) might say this is a convenient way of getting round the loanback rules.
We have always been nervous about this and we have now heard that HMRC are taking an interest, which doesn't surprise us. Also it's no surprise that the more aggressive cases of this seem to involve SSASs.
So yes, I think SSASs should be regulated; the argument now is stronger than it was. There really is little difference between a SSAS and a SIPP in practice and it doesn't make sense that one is regulated and the other isn't. Misuse of SSASs will give the whole self-invested pensions industry a bad name. And if someone says to you "we can do XYZ by switching to a SSAS" it might be best to approach with caution.