Ellie Bennett on how the SSAS has risen again in 2009

For one product in the pensions space, 2009 really has been a great year. The Small Self-Administered Scheme (SSAS), once dismissed as a product belonging to an almost bygone age, is singing its comeback song.

Providers and financial advisors have been reporting a significant increase in the number of SSAS queries they are fielding. As way of an example, personal pension specialist Hornbuckle Mitchell has seen a 15 per cent rise in SSAS business levels over the last 12 months.

But in a year so fraught with economic difficulties as the one we're in, what has facilitated the return of the SSAS? What's its secret?

No longer in vogue
To answer the question, you have to go back to why the product's popularity dropped in the first place.

The SSAS suffered from an 'image crisis' after A-day, when its more glamorous and media-friendly cousin, the Self-Invested Personal Pension (SIPP), grabbed the limelight and overshadowed the SSAS.

This eclipse however was 'unfair' on the product, says Rupert Curtis, managing director of SIPP and SSAS provider Curtis Banks, as "the A-day changes made [SSASs] virtually identical to SIPPs," and not in any way a 'lesser' product.

SSASs simply went out of fashion, despite there being no change in their suitability for business owners, says Ian Hammond, managing director of SSAS provider, Rowanmoor Pensions. For SIPPs, on the other hand, "A-day marked a turning point for operators in the market, as life offices, who had previously outsourced their SIPP administration to third party providers, invested heavily into developing and promoting their own platforms.

"Some actively pursued a strategy of 'SSAS slating'," continues Hammond, "and the few specialist SSAS providers still in operation in this niche market, had a small voice in comparison".

However, there was one A-day change, according to Martin Tilley, pensions consultant and business development manager at Dentons Pension Management, that has been detrimental to SSAS new business.

This was a legislative change that led to a 'no tolerance' policy of error positions, whereas previously there would have been time to put mistakes right before HMRC took action.

Exodus
"The new rules meant any breach and the scheme was subject to instant and quite (harsh) fines," says Tilley.

"A number of the pensioneer trustees left the market, as the administrator role is onerous unless you do your job properly. As a result, some clients opted out of SSASs and into SIPPs, sometimes for no good reason, and IFAs also took the opportunity to transfer clients, which brought them under their influence."

Many providers, mostly the big insurance companies, compounded the difficulties by pulling out of the SSAS market following A-day, according to Nathan Bridgeman, director at Talbot & Muir, the SSAS division of Nottinghamshire-based TM SIPP Services; examples include Norwich Union, Skandia, Friends Provident, Clerical Medical, Scottish Life and Scottish Mutual.

"Without the marketing machines of these companies offering the SSAS, they were never going to get the (recognition) that they deserve."

He adds: "The legislation from 2004 onwards was such a moveable feast that it was difficult to see where SSAS would now fit in. The message went out that the SSAS was dead. Those putting out the message did however have vested interests."

New SSAS products, he points out, were jettisoned by the positive publicity that the SIPP was receiving.

Comeback
The SSAS's return to popularity is down to, in the main, the financial crisis and economic downturn.

Hornbuckle Mitchell's Stewart Dick explains how the recession has encouraged this resurgence in SSAS business: "The most common driver here is the ability for a SSAS to make a 'loanback' of funds to the sponsoring employer - in the current climate many companies require funding but are having difficulty borrowing from banks; so they turn to their pension funds and borrow from them instead."

The SSAS, for example, is able to lend the sponsoring employer up to 50 per cent of the fund's net market value. Rowanmoor's Hammond explains that those clients who are being offered loans by banks at the moment are being offered them at "extortionate rates" when compared to the current base rate. "Base plus five per cent is common and base plus eight per cent is not unheard of. A SSAS loan may be granted at one per cent over base, fixed for the term of the loan, and although it must be secured against assets by way of a first charge this is attractive in the current market."

Plus, there are a few other attractions to having a SSAS, such as the flexibility of the contract and higher level of control that the member of a SSAS gets as trustee.

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