Tax Legislation and Provider Regulation
It is the Finance Act 2004 (and subsequent amending legislation) that currently sets most of the rules applying to registered pension schemes and HM Revenue & Customs (HMRC) are charged with ensuring the rules are adhered to. High tax charges are incurred where the rules are not adhered to. The role of the pension scheme operator is to administer the SIPP or SSAS in line with both the scheme rules and current legislation. As such the pension scheme operator is responsible for reporting taxable events to HMRC and making scheme tax payments from the pension.
A SIPP is classified as a personal pension, as each member enters into a separate contract for the pension with the SIPP operator and each member's pension assets have to be separately identifiable from the assets of the other members. A SIPP is covered by the UK financial services regulator, the Financial Conduct Authority (FCA). This means that both the operator of the SIPP and any adviser recommending someone to set up a SIPP needs to be appropriately authorised by the FCA. This can be checked through the Financial Services Register (http://www.fsa.gov.uk/register/home.do). The FCA sets rules and guidelines on how SIPPs are operated, communicated, marketed and advised on in line with the Financial Services and Markets Act 2000.
A SSAS on the other hand is classified as an occupational pension scheme as it is established by an employer or trade body to provide pension benefits for one or more directors and senior employees, which means it falls outside of FCA regulation but instead is covered by The Pensions Regulator (TPR). TPR's primary objectives are to protect the interests of the members of work-based pensions and to promote good administration and understanding of work-based schemes. This particularly relates to large employer sponsored pension schemes where the scheme members may not have much, if any, day to day involvement in the scheme. This contrasts to SSASs where they are typically smaller in size (maximum of eleven members) and all members are trustees. Having said this, TPR instils some good disciplines on the running of the SSAS and also provides some good educational material for pension scheme trustees.
In each case, in order for beneficial tax treatment to apply (i.e. tax relief on personal contributions and tax efficient investment) the SIPP or SSAS needs to be registered with HMRC - the scheme operator is usually responsible for arranging initial registration and then submitting various tax returns thereafter.