On 6 April 2018 the government’s new legislation, impacting Small Self-Administered Schemes (SSAS) came into effect. The legislation, a response to a consultation into ‘pension scams’ aimed at tackling fraud in the industry, allows HMRC to not only intervene in the creation of new pension schemes but also to de-register existing schemes that are found to be registered with a dormant sponsoring employer.
Whilst we applaud all efforts to tackle fraud, the new regulations could have wider consequences for those currently opting for SSAS set-ups. There are three keys impacts from the new rules:
1 – Legitimate schemes caught in the crossfire
The primary concern for many in the industry is that, while the new rules will stamp out illegal or fraudulent schemes, there are many existing SSAS’s that are operating legitimately but, for a variety of reasons, have a dormant company as a sponsoring employer.
An unintended consequence of the new regulations is that legitimate schemes could possibly be subject to the same clampdowns, effectively caught in the crossfire and subject to more intense scrutiny or new arrangements. Whilst solutions are being presented to the government to overcome this potential issue, it is important to always seek expert advice should a situation arise.
2 – Mass movement from SSAS
In the lead up to the new regulations coming into effect there were widespread fears of mass movement to alternative schemes such as a Self-Invested Personal Pensions (SIPP). This move can be complicated and costly, particularly where schemes have assets that are held collectively, or, where property is involved.
Before considering the switch, it is worth noting that, whilst the new regulations can impact companies that cease to trade, are made insolvent, or where the sponsoring employer is intentionally removed prior to sale, it is apparent for established schemes where there is no employer that there are no implications.
3 - Slower moving set-up
A final unintended consequence of the regulations coming into place is the time it is taking for companies to register new schemes. Thanks to a more stringent ‘check and register’ scheme put in place by HMRC to confirm the legitimacy of a SSAS, the process of confirmation can take around 10-12 weeks and no contributions can be made prior to this time.
For those who have their year-end outside of the traditional March or April deadlines it is worth making note of any additional time needed and looking at some short-term alternatives such as a SIPP, which can be easier to establish, and input funds which can then be transferred to a SSAS post-registration.
While there has been plenty of talk about the new regulations coming into force, it is only now that we may begin to see the true implications, and the consequences, unintended or otherwise.
If you would like to discuss any topics related to SSAS, pensions or other aspects of your financial planning, please get in touch with our team today on 01740 667 099.