'Fit and proper' persons
It is a sad fact that scammers and pension liberators have in the past targeted Small Self Administered Schemes (SSAS) with a view to abusing the rules governing these tax-advantaged pension funds. In an effort to prevent this, HM Revenue & Customs (HMRC) requires that all parties appointed as the Scheme Administrator for the purposes of the pension tax legislation, are able to declare themselves as ‘fit and proper’ persons.
HMRC can refuse to grant a new scheme registered status if it believes this not to be the case and can withdraw the scheme’s registered status if it has reason to believe that any of the parties making up the Scheme Administrator do not meet the criteria.
HMRC has issued guidance notes to assist individuals in respect of who could act as a Scheme Administrator. The Scheme Administrator is likely to be a ‘fit and proper’ person if they are familiar with, and capable of competently performing, the Scheme Administrator’s responsibilities and there is nothing in their past behaviour to suggest that they should not be responsible for the financial management of the pension scheme.
A Scheme Administrator might be an individual or several individuals acting together (such as the trustees), a corporate body or public sector body. The scheme’s trust deed and rules will usually set out who the Scheme Administrator is. With a Dentons’ SSAS, the member trustees (those persons responsible for the day to day running of the SSAS and for all the investment decisions) and Dentons’ Professional Trustee company will together be the Scheme Administrator. All members are initially appointed as member trustees by the sponsoring employer, in addition to the Professional Trustee.
The main roles of the Scheme Administrator are:
- registering the pension scheme with HMRC
- paying certain taxes to HMRC
- operating tax relief on member contributions under the relief at source system
- reporting events relating to the scheme and the scheme’s administration to HMRC
- making formal returns to HMRC
- providing information to the scheme members, and others, about Annual Allowances, lump sum allowance usage and other benefits and/or transfers.
There is no test or qualification to pass and whilst not setting out a definition of who or what a ‘fit and proper’ person is, HMRC does provide plenty of guidance on factors that would lead them to believe a person or parties are not up to the tasks, which include that the person:
- does not have sufficient working knowledge of pensions and pensions tax legislation to be fully aware and capable of assuming the significant duties and liabilities of the Scheme Administrator, or does not employ an adviser with this knowledge
- has previously been involved in pension liberation
- has previously been the Scheme Administrator of, or otherwise involved with, a pension scheme which has been de-registered by HMRC
- has been involved in tax fraud, abuse of tax repayment systems or other fraudulent behaviour including misrepresentation and/or identity theft
- has a criminal conviction relating to finance, corporate bodies or dishonesty;
- has been the subject of adverse civil proceedings relating to finance, corporate bodies or dishonesty/misconduct
- has participated in or been connected with designing and/or marketing tax avoidance schemes
- employs as an adviser a person who has been involved in pension liberation or tax avoidance
- has been removed from acting as a trustee of a pension scheme by the Pensions Regulator or a Court, or has otherwise seriously contravened the pensions regulatory system, or the regulatory system of any other professional/governmental regulatory body
- has been disqualified from acting as a company director or is bankrupt.