Many FPC clients have utilised the flexibilities offered by Small Self-administered Pension schemes over the years. Not only have they been a vehicle for tax efficient pension contributions they have also been used to support their wider business goals allowing them to take advantage of the ability to invest in commercial property or make loans to the sponsoring employer to invest in the business all of which has a positive knock-on effect on the local economy.
In the light of the current economic environment where such stimulus is so vital it is a matter of some concern that the viability of Small Self-Administered Schemes (SSAS) may be undermined by the introduction of unaffordable levies potentially under consideration by the DWP.
FT Adviser this week published an article – The end of the SSAS?: changes to levy may be ‘catastrophic’ – questioning if proposals to charge pension schemes a £10,000 premium to address the ongoing deficit in levy funding which could bring an end to the existence of small self-administered schemes (SSAS), with providers urging the government to reconsider.
We asked Jane Davies, Director at Whitehall Group (UK) Limited, a specialist firm providing administration and trustee services to self-administered pension schemes, for her view…
“It is widely hoped that SSAS’s will be exempt from the proposed levy premium, as they usually are from particular regulatory governance requirements. However, this is not stated by the Pension Regulator in the consultation, and we understand it aims to wait for industry feedback first before confirming. If passed, the proposal would be detrimental to the industry, member’s funds and the small businesses that use SSAS. It is important to give feedback to the consultation and we have already responded”.
The three options on the table are:
- Stick with the current regime with levies frozen until 2026/27
- Keep the current structure but increase rates by 6.5% a year
- Increase rates by 4% a year and introduce an extra premium of £10,000 for small schemes
“We are actively challenging Option 3. This is analogous to forcing the closure of all corner shops in the country and compelling everyone to shop at Tesco or Asda. As professional administrators and trustees of 1,800 SSAS, which by requirement are 1-11 members, option 3 would have a hugely disproportionate impact on the members of the schemes we administrator and subsequently our business, and we do not support this.”
“SSAS have access to the widest range of investment options of any pension product on the market, including direct commercial property, and employer related investments such as loans, leases, and unquoted shares. SSAS by nature cannot consolidate, so it feels like the regulator is campaigning for the closure of the SSAS product by suggesting this. If closing a SSAS to avoid the unfair additional levy premium, assets held will highly likely not be transferrable, as they are not permitted in larger schemes. This would reduce member’s range of investment opportunities and possibly impact the small businesses that are the sponsoring employer of such schemes, as they need to sell properties they occupy, repay loans, and sell shares earlier than proposed. The range of investment and pension saving options in the market would become restricted.”
Commenting on the proposals, FPC Managing Partner Moira O’Shaughnessy concurred with Jane’s view:
“For a small business owner, a SSAS can offer additional flexibilities over traditional pension arrangements and can actually help a business grow by investing in its premises and by providing finance to support investment in the business itself. They require a high level of governance with experienced scheme administrators and un-animus trustee decisions to look after the best interest of the members. Adding further costs will undoubtedly have a detrimental impact on the ability for a business owner to invest in their business whilst trying to provide for their own retirement”.
Jane has a final call to action!
“I sincerely hope that the consultation will exclude SSAS but as yet, this has not been confirmed. The industry has therefore come together about this, and we are encouraging as many people as possible to respond to the consultation.”
FPC is interested to hear your thoughts, so please don’t hesitate to reach out to discuss it further with us.
