It’s often claimed that the stable door is only closed after the horse has bolted. When it comes to self-invested pensions, this could certainly be said of the regulator and revenue.
In fairness to the aforementioned, I suspect their processes require evidence of widespread misuse and/or abuse, and the impact on the market or Treasury before they can act.
Having taken on the regulation of Sipps more than nine years ago, it is to be hoped that the watchdog has got regulation well under control, with responsibilities for asset acceptance now firmly in the hands of regulated Sipp operators. There should be little scope for tax abuse or, and in particular, inappropriate investment vehicles.
Sadly, no similar regulatory model applies to SSASs, to which scammers and tax liberators have now turned their allegiance.
Through their constitution, SSASs still permit member control via their role as member trustees. Once monies are transferred into a registered SSAS there is no authorised or regulated body to stop the member(s) doing exactly what they wish with the scheme assets.
Certainly, there are financial penalties if unauthorised payments are made from the fund that is not sanctioned by the governing deed or the HMRC rulebook, but these disincentives will apply only after the event has occurred, at which point the perpetrators are typically long gone.
Few, if any of us, will have any sympathy for those knowingly flaunting the rules. Of greater concern are the genuine, gullible or naive individuals whose pension savings are lost in harebrained investment scams. Their only crime is having been too greedy or too trusting.
So how have we got here, what are the issues, and what is being done about it?
Governance
Firstly, let’s tackle regulation. The FCA does not regulate SSASs, which are trust-based occupational pension schemes. Regulation comes in the form of The Pensions Regulator (TPR), but a scheme is only registered with them if it has more than one member. By their own admission TPR do not have the resources to police around 50,000 individual SSASs.
Probably a better word for the overseeing of SSASs is governance, which lies in the hands of HM Revenue & Customs. They were ably assisted up to 2006 by the role of a pensioneer trustee, whose responsibility it was to ensure that the scheme was not wound up, other than in accordance with scheme rules. Those that did the job well also acted as a proactive co-signatory to the scheme affairs and were therefore able to prevent inappropriate actions by member trustees, and could at least lend an experienced ear to any investment propositions.
Sadly, the role of pensioneer trustee was removed in 2006 with the move from discretionary approval to the registered scheme regime. Apparently the role of a compulsory trustee does not sit well with some European Union legislation.
In the latter half of 2016, HMRC stated it had no plan to revive the role, despite TPR’s statement that “the resurrection of a requirement for pensioneer trustees would greatly reduce the risk of SSASs being a vehicle of choice for scammers who often market them as products offering esoteric investments and unrealistic returns”.
