The changes and freedoms that were introduced to the UK pensions system in April 2015 by chancellor George Osborne have made small self-administered schemes (SSASs) even more attractive to entrepreneurs and small business owners. In part, this is due to a SSAS providing an attractive tax wrapper for company directors and senior employees, assisting not only in the provision of retirement savings and succession planning but also in the development of the company itself by self investment and capital/asset swap with the sponsoring employer.
SSASs also allow the scheme members, in their capacity as trustees, to control the scheme’s investments. A SSAS is a registered pension scheme with HM Revenue and Customs (HMRC) and as such, there are responsibilities and obligations on the scheme trustees and/or the scheme administrator.
However, in practice, the knowledge needed to fulfil this role is great and the potential tax penalties and fines for omissions or errors can be very high.
In 2006, the role of the pensioneer trustee (a professional trustee) was removed as a condition of a SSAS’s initial and conditional approval. This led to a number of client companies/schemes removing their incumbent professional trustee along with the now redundant actuary with the intention of saving money. The consequences of this have been a number of schemes being poorly run and scheme rules not being adhered to or updated with current pension legislation, both of which could lead to tax charges.
Individuals operating without the assistance of a professional trustee or scheme administrator may struggle to meet their duties. Conflicts may arise where they are acting in the capacity of company director/member/trustee. An independent specialist is often the way to avoid these problems. As a result of this there has been an increase in SSAS clients looking for formal guidance on their schemes where they are currently non-professionally advised. In particular where SSASs are concerned they must now also comply with the “fit and proper administrator” requirements. These requirements became effective from 1 September 2014 and are now starting to have a real impact on schemes. If there is no ‘fit and proper person’ in place or indeed there are concerns over them, HMRC may withdraw the scheme’s tax registered status which can have severe tax implications for the scheme beneficiaries.
SSAS practitioners may offer a variety of services but most advisers agree that the only way their client can be fully reassured that the scheme is operating correctly is if a proactive role is provided.
For advisers, there is a real business opportunity when advising entrepreneurs and small businesses on their pension arrangements around a SSAS. So what does an adviser need to consider when talking to a SSAS that has been self-run?
Scheme documentation
A SSAS as a minimum should have informal annual statements drawn up. These should detail:
– The contributions paid
– Any assets held
– Income received by the SSAS
– Benefits paid to beneficiaries
In addition, each individual member should have an annual statement. These should detail:
– Contributions received for them
– The value of their proportion of the pension fund.
Asset documentation
Any assets held by the SSAS should of course be properly administered. These should include documentation confirming good title and ownership of the investment and frequent valuations. Where more complex investments exist further information should be held.
