Early action pays off in pensions

Mar 4 2008 by Liz Haggis for The Journal

SMALL Self Administered Schemes (SSASs) have historically been popular with owner-managed businesses mainly because of the investment powers and greater control they gave members.

So, HM Revenue & Customs imposed tighter control on their operation than on other schemes.

SSASs can vary between a relatively simple arrangement, usually effected through an insurance company, to a more complex arrangement set up to suit specific needs, usually through pension consultants.

SSASs are special types of pension arrangements with very wide powers. For this reason both seller and buyer should act earlier rather than later. The buyer will want to ensure its liability in relation to the SSAS is minimal and the seller will want to ensure the buyer is unable to access funds once a transaction is complete.

Top tips for the buyer:

1. Any loans from the SSAS to the company are normally repaid on or before completion.

2. The purchaser will inherit the SSAS in a share sale. The buyer will normally insist on a “ring-fencing” deed before completion which will transfer all the powers, obligations, duties and liabilities of the principal employer to the trustees.

3. A well drafted ring-fencing deed will normally ensure that all but the most determined purchaser will access the funds in the SSAS for either personal or business use.

Top tips for the seller:

1. Seek advice on pension issues early to avoid costs and delays.

2. The seller can protect its position by ring-fencing its powers and obligations with a ring-fencing deed.

3. Where it is impossible to sort out ring-fencing documentation or if the seller has left it too late to sort out their pension affairs, it may be necessary to draft provisions in the sale and purchase agreement which allow SSAS provisions to be protected until members transfer out.

Sellers often leave it far too late once control of the company which sponsors the SSAS passes to a third party. So, the seller and buyer should speak to their financial adviser and/or lawyer sooner rather than later.

For more information please contact Liz Haggis, associate, or Asmah Baig, solicitor, at Dickinson Dees LLP on 0844 98415.