I have set out in previous articles for SIPPs Professional the need, when looking after a Small Self-Administered Scheme (SSAS), to document trustee decisions as they happen to ensure good practice and avoid any potential disputes in the future.
A recent case did however remind me of the need for all trustees to have a thorough understanding of the scheme documents and rules from day one.
The powers to operate the scheme will be set out in the scheme’s deed and rules. It is important for clients and their advisers to have at least a base knowledge of these documents or rely on a professional practitioner if they do not. These rules must be kept up to date, to prevent conflict between current legislation and what the deed and rules may or may not permit.
These powers, used for example to add a new employer, add a new scheme member or a new trustee or even to amend the rules, will be vested either with the principal employer, the scheme’s trustees or in some circumstances a combination of both.
It is also important to remember that a SSAS is granted a number of administrative concessions provided that all members are trustees of their scheme.
The Deed and Rules will also set out how the trustees should use their decision-making powers. Again, to comply with administrative easements, this power will most usually require decisions to be unanimous. With a multi member scheme, the unanimity of this decision-making process can be cumbersome and there are several ways to alleviate this.
The trustees might resolve to delegate the power to operate the bank account to a majority or trustees for example. Some decisions, such as those approving investment in the sponsoring employer, cannot be delegated though and others, such as the approval of benefit payments, should really remain within the domain of all trustees. Which is fine, provided all trustees are present and capable.
Where not all are present (a six-month tour of the world perhaps?) technological solutions can be found and documents can be completed in counterpart for example. Electronic signatures are becoming more commonplace. In extreme cases a trustee power of attorney can be put in place (under Section 25(6) of the Trustee Act 1925) if the absence is likely to be less than 12 months.
But if a trustee is unable to act through incapacity, trustees could face the worrying situation of a scheme “frozen” and unable to function fully.
Some incapacity may be foreseen in the future, perhaps in later life, but the usual precaution of a personal financial power of attorney will be of no use since these relate to the personal affairs of the donor only and do not extend to the donor’s responsibility as a trustee. As set out above, a trustee power of attorney can last for only 12 months, and cannot be extended if the donor is incapable.
For this reason, SSAS trustees should consider taking precautions against perhaps the situation whereby a member/trustee becomes incapacitated (through sudden illness or accident) so that on that trigger event, the decision-making process is automatically delegated for example, to a majority of trustees including any independent trustee.
The resolution to effect such a change would need to be carefully drafted so it became effective only on certification of incapacity by a medically qualified professional and each trustee would need to enter this resolution knowingly and whilst capable to do so. The trustees could then legitimately at least continue to operate the scheme until a permanent solution was put in place.
Failure to address such a situation could require application to the Court of Protection, who in such circumstances can appoint an attorney to act for the incapacitated trustee. These processes are however not short and not inexpensive.