The executive director of regulatory policy at the UK's Pensions Regulator has come out, somewhat controversially, in favour of banning small self-administered schemes.

In a blog on the regulator's website, Andrew Warwick-Thompson begins by congratulating HM Government on its recent consultative proposals for fighting pension scams. In its consultative document, for which comments are now closed, it made the following points.

• A cold-calling ban is a good way of discouraging pension scams whilst also sending a clear message to consumers that they should hang up if they are 'cold-called' about pensions - a problem that afflicts some elderly HNWs.
• Current legislation gives pension schemes limited scope to refuse a transfer to a scheme that looks like a scam, even if they have legitimate concerns about the safety of a member’s savings. The Government wants to change the law to allow firms to block pension transfers in certain circumstances - a decision which, if it takes it, is likely to drive HNWs away from the UK when they are looking for places to set up their schemes.
• Single-member occupation pension schemes currently require no registration with the Pensions Regulator and can be set up using a dormant company as the sponsoring employer. They are therefore an easy way for fraudsters to register a pension scheme with HM Revenue & Customs. The Government wants to make it a rule that only an active company can register a pension scheme.

Just hang up!

Warwick-Thompson goes further, proposing to ban the criminals’ most common form of approach – the telephone cold call. He adds: "An outright ban on pension cold calls would send a powerful message to all pension savers – ‘A cold call about your pension will be from a criminal. Just hang up!’" He is also in favour of a ban on cold email and text campaigns.

A list of safe schemes

Secondly, he is proposing a ‘safe schemes list’ that trustees and managers can trust when they are looking for legitimate transfer destinations. To this end, he favours a restriction of a member’s right to a statutory transfer to either an authorised master trust or an product (S32, GPP, SIPP etc) regualted by the Financial Conduct Authority. The FCA already publishes information about its regulated providers and the Pensions Regulator is planning to publish a list of all master trusts whose operations it has authorised once the Pension Schemes Bill becomes law.

The end of SSASs

Finally, he is proposing to close off relevant small schemes (commonly referred to as small self-administered schemes or SSASs). Some recent trust scheme return data research shows that of the 34,500 defined contribution schemes in the market now, 32,000 are micro schemes – having only 2 to 11 members – and of these 21,000 are SSASs. Added to this, HM Government’s consultative exercise suggests there may be more than 750,000 one-member SSASs.

He believes that this a problem because SSASs are exempt from many of the legal duties designed to protect members that are applicable to larger schemes. He also believes that the ease with which a SSAS can be established, and the minimal legal and reporting requirements for such schemes, has made it the vehicle of choice for criminals who want to set up a scam.

He concludes: "In my view, SSASs have gone far beyond the scope of the policy intent that created them. Self-invested personal pensions (SIPPs), which are the subject of far tougher regulation by the FCA, are a safer vehicle for consumers who want control over the investment of their pension pot. I believe that pension transfers to SSAS arrangements ought to be banned. In fact, to put a stop to their abuse, I believe that an outright ban on the establishment of any more SSAS arrangements also warrants serious consideration."