SSAP (Small self-administered scheme) Safety Query

[sjapok]

I'm considering setting up an SSAP but I'm concerned about the safety of my funds.

Normally, pension assets are held with a large insurer e.g. Zurich, Aviva etc. However, with an SSAP the companies involved can often be bespoke e.g. ITC and the investment brokers used to purchase shares/ETFs can also be small/bespoke.

This sounds a lot riskier than retaining my current pension with a large insurer?

Is there any government guarantee scheme with respect to pensions in the case of fraud etc.?

 

[Marc]

Equitable Life - large insurance company collapsed after attempting to reneg on contractual guarantees it had given to its clients, mainly lawyers and accountants who took them to court and won or, depending on how you look at it, lost because they caused the collapse.

AIG - even larger insurance company ran into massive financial difficulties during the financial crisis.

If an Insurance Company goes down (which rarely happens - they tend to be bought by another company) your assets are held on the balance sheet of the Insurance Company, you are a creditor in a long line of creditors.

With a SSAS you will have a Trustee and typically a separate custodian structure such as Pershing.

This separation of roles and responsibilities makes for a more transparent structure (certainly from a cost disclosure perspective) compared to an Insurance Company providing a pension in Ireland today. But be aware, that the same functions are all happening within the Insurance Company, you just don't see them. I wrote about this in the Sunday Business Post around the time of the collapse of Custom House Capital.

From a risk management perspective, what matters is where the legal title to the assets is held and how secure that is.

Pershing, for example, has Assets under Custody globally of around €1.7 Trillion

That's such as staggeringly large number that a reference point may help.

How big is a trillion?


If €1 = 1 second then 10 minutes ago is €600

€1M = 12 days ago

€1billion = May 1986

€1 trillion = 29,693 BC

 

[Steven Barrett]

As Marc said, you have to look at who actually owns your money, especially after the fall of Custom House Capital.

When researching alternative providers to offer clients, I spoke to a lot of different providers and the first question was, who holds the money. One of them, told me they did in segregated accounts and the next week it was reported they were taking "loans" from client accounts!!

Pershing Securities are used as the custodian by a lot of platform providers in Ireland. They are owned by BNY Mellon. While there is no guarantee that they won't go bust, they are at a scale that is unknown to an Irish firm.

Steven
www.bluewaterfp.ie

 

[LDFerguson]

Is there any government guarantee scheme with respect to pensions in the case of fraud etc.?

No there isn't.

Bank accounts of a SSAP require two signatures, including yours. If you're investing in funds via a platform, only go with one where the monies are held with a solid custodian like Pershing Securities as mentioned above.