Sam and Ben are an entrepreneurial couple who have been running a successful limited company business for a number of years, having created and sold some businesses along the way. They know a thing or two about business start-ups.
In the early days, and upon the advice of their trusted financial adviser, they established a small self-administered scheme (SSAS) as a pension vehicle to meet their future retirement needs, as well as a vehicle that could be used to help with their businesses through their various lifecycle phases.
Historically, their SSAS assisted their businesses through loans, commercial property and even intellectual property. Their SSAS, therefore, served them very well and it continues to do so; the SSAS owns the modern office building from which their business trades.
When pensions “A-Day” came along in April 2006, Sam and Ben were made aware by their professional trustee (a so-called “pensioneer trustee” at the time) that it was no longer an HM Revenue & Customs requirement for it to be attached to the scheme.
Sam and Ben had no hesitation in confirming to the professional trustee that they wished it to continue in place because they had greatly valued its input and guidance on all sorts of matters over the years – not least of which was ensuring that all employer-related investments were properly structured and documented.
The pair were somewhat dismayed to learn that many SSAS clients decided to dispense with their professional trustees shortly after A-Day, especially considering that some new pension rules had come into effect at the same time and Sam and Ben recognised that these could be quite complex to operate in practice – especially at retirement time.
The duo clearly had a good relationship with their professional trustee firm. Like theirs, the firm had been a start-up and they were one of the first clients to use their trustee services.
Sam and Ben recognised from the outset that the trustee firm needed to build some size and scale in order to become profitable and sustainable. They noted that it was building a sizeable book of self-invested personal pension (SIPP) clients on very low-cost terms and that it was subsidising its income and profitability by taking a significant share of the bank interest it was generating across its book of SSAS and SIPP clients.
Sam and Ben were not unduly concerned about this, provided that service levels continued to be acceptable.
Is this a wind-up?
Unfortunately, and completely out of the blue, Sam and Ben received a letter from the professional trustee firm. It stated that the firm was being wound-up within a short period of time and that it would no longer be in a position to act as professional trustee to their SSAS.
It also stated that its book of SIPP clients had been sold-off to another SIPP provider they had never heard of. There were no reasons given for the sudden dramatic changes being forced upon clients of the firm, but Sam and Ben were conscious that bank interest rates were at historic lows.
From a cursory glance at the last set of published accounts for the trustee firm, Sam and Ben noted that almost all of its profitability could be attributed to the bank interest it had been receiving.
High and dry
Sam and Ben were annoyed and upset that their SSAS was being left without the services of a professional trustee. They were angry about the lack of notice they had received and they felt that they had been left high and dry, especially as they were about to draw retirement benefits and needed help with the complex calculations and processes involved.
Fortunately, their trusted adviser was already working on their behalf. She had sourced a replacement professional trustee that had a long track record of sustainable profitability, a strong balance sheet, a reputation for outstanding service and experience in taking over existing schemes such as theirs.
Sam and Ben were delighted that, within a few weeks, the new trustee was in place and administering their SSAS professionally and efficiently and that they were able to start drawing retirement benefits.
Stephen McPhillips is technical sales director at Dentons Pension Management