To the lay person, it may seem odd that a sort of pseudo-occupational scheme falls under the jurisdiction of TPR rather than the FCA. Occupational schemes are not tied to one pension provider, whereas Sipps are. Therefore, in theory, a failure by a firm providing professional administration services to an occupational scheme, whatever its size, should not expose scheme assets to the same risk degree as if a Sipp provider fails. This helps explain why a Sipp operator must keep a certain level of capital available if it wants to operate a Sipp, whereas SSAS operators do not.
An emerging issue is that there are small schemes where the members are reliant on a third party to keep scheme records, and so there is a risk if that third party disappears. While the FCA may be more of a deterrent to a firm setting up as a SSAS specialist, as occupational schemes are out of their domain the more appropriate reaction is to consider whether TPR could be doing more in educating, monitoring and engaging with trustees and members.
Capital buffers
Another consequence of regulation by the FCA is the need for Sipp providers to hold capital as a buffer against the firm running into difficulty. This should provide consumers with added protection as it would allow the provider to carry on in business while passing on the business to another firm.
The Sipp industry is keenly awaiting the new rules for determining how much capital a Sipp provider must hold to be allowed to continue in business. These rules are expected in the summer and the period of uncertainty is causing some investors to use SSAS as a more flexible pension vehicle. Should similar capital adequacy rules be applied to SSAS providers?
This question is similar to asking whether accountants should have to hold money in reserves if they complete tax returns. If the accountancy firm closes, you can simply transfer your business elsewhere and pass on the paperwork. Of course, you will need to keep records yourself so you are not reliant on the accountant.
Regulation discussions
There is the inescapable issue that it is much easier to set up a firm to provide SSAS services regardless of your level of expertise. Ultimately, any distrust in such pension firms may end up being a focal point for those questioning whether more supervision is needed of firms acting as independent trustees and pension administrators to occupational schemes.
Even so, any talk of regulation of SSASs should discuss whether more needs to be done by TPR in ensuring trustees are acting properly and HMRC in monitoring whether there is any abuse of the tax rules. Regulation by the FCA is unnecessary and likely a bad fit.
