Of course, fees are not everything; service is key in the SSAS world, as is whether or not the provider is acting as a professional administrator. This can make a big difference to how the SSAS operates and ensuring it stays within the letter of the law.
The reason fees are often so high is due to their paper-based system, according to Xafinity’s Mr Steedman. “Traditional SSAS practice [relies on an] old-fashioned chequebook and pen,” he says. “It is a little bit more difficult to get SSAS trustees to give that up. They are definitely, by their nature, much more clunky. That is why SSAS fees are generally higher than Sipp fees.”
SSASs have struggled to keep up with other pension products in a platform world, mostly because they are so often used for bespoke commercial property purchases and loanbacks. These do not lend themselves to platform processing, adding on manual time and costs. And, of course, each SSAS must be registered as a separate pension scheme, inevitably adding more paperwork.
According to an estimation by Rowanmoor, a three-member SSAS can be more cost-effective than three bespoke Sipps. As the table shows, fees are typically levied on a flat rate rather than as a percentage of assets under management, and assets are often used for property purchases or loanbacks rather than collectives. Because of this, the more members in the SSAS, the more cost-effective the scheme becomes.
Beauty parade
With both being bespoke pension arrangements, it is hard not to compare SSASs with Sipps. Since the realisation that SSASs would not die out after A-day, commentary has bounced back and forth over whether year ‘X’ would finally be the one when SSASs overtake Sipps.
But a SSAS is a far more niche product, fitting a very particular set of circumstances. This is reflected in the funds under management; the latest Money Management Sipp survey in October 2012 showed £88.57bn held, compared with the £15.75bn held in SSASs.
It is far easier to set up a Sipp; an individual simply needs to approach a provider to get started. A SSAS is far more complex. Practically anyone can set one up, but its trustee structure means significantly more legal paperwork and there is more onus on scheme members to get it right themselves.
The hefty clampdown on Sipps seen in 2012 has led some to believe more people will be interested in SSASs. With The Pensions Regulator taking a much more backseat role regarding SSASs than the FSA does with Sipps, the former has the potential to attract attention in the future.
