Why pension operators or trustees need to review investments
As seen in the 'What Incurs Tax Charges' section of this site, there are a number of investment scenarios that can potentially create high tax charges not just on the scheme member by also on the scheme administrator. This means that pension operators or trustees, as they will often be the scheme administrator, will in most cases review 'alternative' investments before deciding to allow them to be held within their SIPPs or SSASs. This is to assess:
- the likelihood of pension scheme related tax charges applying;
- whether there is any prospect of any 'open-ended liabilities' which could affect the overall pension scheme and or SIPP/SSAS operator or trustee;
- how easy it is to dispose of the investment, especially in the event of death of the scheme member; and
- how the investment is valued for investment scheme purposes.
Where a SIPP/SSAS operator or trustee decides to allow an investment to be held in the pension scheme this is often merely confirmation that the investment is unlikely to create a tax charge or other liability on the SSIP/SSAS operator or trustee. It is not, unless the pension operator or trustee is also providing financial advice, any endorsement of the suitability of the investment to meet the scheme member's investment objectives or that the investment is a 'good' investment. The former is the role of the scheme member's financial adviser, where one is appointed.
It is also important to point out that in most, if not all cases, the SIPP or SSAS trust deed & rules gives the operator/trustee full discretion over what investments are held in the schemes they run. Alternatively there may be separate terms and conditions entered into by a SIPP member with additional restrictions on the investments that can be held. As such they are not duty bound to allow an investment.