The DIY SSAS – still alive and kicking?
News that HMRC have changed processes on registering a new pension scheme appears to be a positive move in tackling pension liberation, but our own experience only a few days later makes me wonder if this is going to give as much protection as we would like.
I’m thinking about the DIY SSAS, something I’ve mentioned previously. Unlike a SIPP, a SSAS doesn’t need a third party administrator or co-trustee. Any company with a bit of knowhow can set up its own SSAS and largely do what it wants with the funds without any outside hands-on control.
The new HMRC rules appear welcome, registration of a new pension scheme will no longer be an automatic process and enhanced checks will be carried out by HMRC before they grant authorisation. They haven’t said what these checks are yet, but they could be very thorough indeed, and it’s a bit like the old pre A-Day process of having to apply for approval – form PS176 back in the old days for those of you in the know…
So what was our experience following on from this? Well, within a few days we received a request to set up a new SSAS for a company, where the client would be the administrator and the trustee. Now this could have been entirely coincidental and a perfectly genuine enquiry from someone wanting our help in setting up a SSAS which they were going to run properly in the future (although in saying that it would be very rare for us not to act as either trustee or administrator). Then again, it could have been someone looking to use our good name as a means to get HMRC to feel comfortable about registering a new scheme for them, following which they could just go off and do as they please. We politely declined……….
This sort of thing could be very difficult to monitor. We could be asked to set up a new SSAS where we are the administrator and a co-trustee, which all sounds fine, and then 6 months down the line they decide to fire us and run it themselves. We could notify the Pensions Regulator, but we would need to evidence our concerns and frankly this would come across somewhat as sour grapes.
The solution, as I’ve said before, is to make SSASs FCA regulated in the same way as SIPPs. It makes no sense at all that 2 types of pension scheme which are in most respects identical should be poles apart in terms of regulation and supervision.
The new HMRC rules are welcome, but treating SSASs like SIPPs would be a much better outcome. We also need to consider that the SSAS market is exempt from capital adequacy requirements and the same levels of supervision surrounding esoteric investments; so it is clear that there is a regulatory black hole that needs some attention here.