The small self-administered scheme (SSAS) isn’t young. Having arrived in the late 1970s, it is still fit and healthy, and every bit as relevant now as it was then. HM Revenue & Customs (and its predecessors) has been the SSAS’s regulator for some 35 years and there has been a long history of rule changes, reporting requirements and, on occasion, punitive tax charges for “rule breakers”.
However, A-Day in April 2006 brought arguably the most significant change in the history of the SSAS – namely the removal of the compulsory pensioner trustee role. That was replaced by the scheme administrator role, which in principle, could be met by any UK-based individual.
This meant that, with no knowledge or experience, a client could be scheme administrator to their own SSAS.
So, realistically, should the client company directors become the self-appointed SSAS scheme administrator?
Who is eligible?
The rules are fairly clear – pretty much anyone can be appointed as the scheme administrator for a SSAS and be recorded by HMRC as such. The registration process on the HMRC database is fairly simple and, once appointed, they remain in place until another person or company is willing to take on the role.
On A-Day, unless HMRC was notified to the contrary by way of letter, they automatically appointed the existing administrator to the scheme.
So, why shouldn’t a client take on the role of scheme administrator for their SSAS?
Understanding the rules
The scheme administrator has a day-to-day responsibility to ensure the SSAS follows all HMRC guidelines and scheme rules. Consider the following points:
• A typical SSAS trust deed and rules may run to more than 50 pages of legal and technical jargon;
• The HMRC manual has hundreds of pages of rules and guidelines, which are not necessarily up to date with the latest legislation;
• The regulations are complex and can be open to interpretation and so pensions expertise, knowledge and practical experience is needed to operate effectively;
• Legislation changes need to be monitored, detected and analysed to maintain current knowledge.
It is extremely unlikely the client will have the time, let alone the inclination, to develop and maintain the level of knowledge required to fulfil the role correctly. Worse than this, it is likely that most clients will not even be aware of the issues and risks they expose themselves to in this role.
Mistakes of going it alone
While a low overall percentage of all SSASs, a material number of schemes have not appointed a professional scheme administrator and have chosen to go it alone. Most SSAS providers have seen their clients remove them as scheme administrator, only to return somewhat sheepishly a few years later in a bit of a pickle.
We have recovered many self-run SSASs over the years and, unfortunately, had to refuse a few. Issues we commonly see, some of which can lead to tax charges, can be seen in Box 1 – and the list could go on and on.
Tax consequences of errors
The potential tax charges are wide ranging and could ruin a lifetime of saving. For example, a single transaction could generate tax charges of 40 per cent to the employer plus 15 per cent to the scheme administrator. If the transaction is large enough the employer is liable to a further
