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You could lose your pension...
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TRUSt_NO_1_2
Posts: 342 Forumite
Most of you have probably heard about the impending financial crisis as a result of the derivatives meltdown that is about to hit some of the world's major banks.Northern Rock will be small fry by comparison.The problem is no one yet know which banks will be affected .Morgan Stanley and Goldman are two prime candidates,but there will be many caught up in the chaos.
This made me look closer at the terms of my broker (TD Waterhouse) where my SIPP is traded (and ISAS),specifically relating to how well my assets (shareholdings) would be protected if they were to have any solvency problems as a result.
I am aware that account holders in banks are merely creditors,but was hoping SIPP Aand ISA holdings would be better protected.Apparently not:
General Risks of Trading
• Our insolvency or default, or that of any other brokers involved with your transaction, may lead to positions being liquidated or closed out without your consent.
• In certain circumstances, you may not get back the actual assets that you lodged as collateral and you may have to accept any available payments in cash.
• On request, we will provide you with an explanation of the extent to which we will accept liability for any insolvency of, or default by, other firms involved with your transactions.
Always look at the last few paragraphs of terms and conditions.They save the worst until last.
This made me look closer at the terms of my broker (TD Waterhouse) where my SIPP is traded (and ISAS),specifically relating to how well my assets (shareholdings) would be protected if they were to have any solvency problems as a result.
I am aware that account holders in banks are merely creditors,but was hoping SIPP Aand ISA holdings would be better protected.Apparently not:
General Risks of Trading
• Our insolvency or default, or that of any other brokers involved with your transaction, may lead to positions being liquidated or closed out without your consent.
• In certain circumstances, you may not get back the actual assets that you lodged as collateral and you may have to accept any available payments in cash.
• On request, we will provide you with an explanation of the extent to which we will accept liability for any insolvency of, or default by, other firms involved with your transactions.
Always look at the last few paragraphs of terms and conditions.They save the worst until last.
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There is of course Government protection in the case of providers going bust: pensions (including SIPPs now) have unlimited protection, like other pensions.The protection on risk based investments like unit trusts is around 48k maximum IIRC.
https://www.fscs.org.ukTrying to keep it simple...
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You have misunderstood what the warnings are saying.In the event the platform ceasing trading, the treatment of client money and assets would of course depend on the particular circumstances. In the event of the company going into liquidation, holdings would be returned to the client or transferred to an alternative company in accordance with client instructions.With unit linked or direct investments you own the investments or a nominee/trustee does on your behalf. The administrator doesnt. However, certain assets cannot be transferred and would need to be liquidated into cash.Assuming your SIPP just holds shares, then the only thing you have to worry about is the value of your shares and the companies you invest in. The same applies to unit trusts or investment trusts.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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TRUSt_NO_1 wrote: »Most of you have probably heard about the impending financial crisis as a result of the derivatives meltdown that is about to hit some of the world's major banks.
Lots of scaremongering about it, yes.TRUSt_NO_1 wrote: »Our insolvency or default, or that of any other brokers involved with your transaction, may lead to positions being liquidated or closed out without your consent.
Translation: if the broker ceases trading while holding your shares, they may be sold so that we can give you back your cash. Even if you'd prefer to have the shares instead of cash. Same for any short selling positions you've set up.TRUSt_NO_1 wrote: »In certain circumstances, you may not get back the actual assets that you lodged as collateral and you may have to accept any available payments in cash.
Translation: if we have share certificates or other collateral we might have to sell the shares and give you the cash instead of sending back the certificate.TRUSt_NO_1 wrote: »On request, we will provide you with an explanation of the extent to which we will accept liability for any insolvency of, or default by, other firms involved with your transactions.
Translation: ask us if you want us to tell you how much of your money you'll get back from us if a broker or any other firm except us goes bust while handing your money.TRUSt_NO_1 wrote: »Always look at the last few paragraphs of terms and conditions.They save the worst until last.
If you don't understand what they mean, asking for a translation here is a good idea.
In ISAs and pensions the assets are usually held by trustees, not the management company. That provides lots of protection because the manager can go bankrupt but you assets aren't their assets, so they are protected. Ask them about their trustee arrangements and how your ISA holdings are protected.
We saw an example of this with Barings Bank, where people who had collective investments it managed kept all of their money because the trustee arrangement protected them and the funds just weren't part of the assets of the bank. It's very different from and more secure than savings or current accounts above the compensation limits.0 -
:eek:the impending financial crisis as a result of the derivatives meltdown
..........when this 'impending' meltdown happens the whereabouts or worth of a pension will be the least of your worries !!!!!
If/When this happens the pound/euro/dollar/yen/yuan in your pocket will be worthless too
Build a bunker, buy a shotgun and stock up on essentials :eek:'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
Lots of scaremongering about it, yes.Translation: if the broker ceases trading while holding your shares, they may be sold so that we can give you back your cash. Even if you'd prefer to have the shares instead of cash. Same for any short selling positions you've set up.
It's those short sellers who seem to be causing much of the trouble, trying to drive proces down so they can make money. I see the LSE has announced a crackdown, starting with Northern Rock.
Trying to keep it simple...0 -
EdInvestor wrote: »There is of course Government protection in the case of providers going bust: pensions (including SIPPs now) have unlimited protection, like other pensions.The protection on risk based investments like unit trusts is around 48k maximum IIRC.
I have recently discussed this with FSCS via e-mail and amongst other information I was informed that:
"in general pensions, prior to the taking of benefits are considered to be the investment product, to achieve a fund of money to provide an income normally by way of an annuity at the time an investor wishes to take benefit. Therefore noted our investment limit of £48,000 (100% of the first £30,000 and 90% of the next £20,000) would apply."
Hargreaves Lansdown also verbally responded with the same when I asked them.
If you are in any doubt always speak to your investment company and the FSCS, do not rely solely on information posted here!0 -
Your information is incorrect.
http://www.fscs.org.uk/consumer/key_facts/Limitations_of_the_scheme/Compensation_Limits/Max levels of compensation:- Long-term insurance (e.g. pensions and life assurance): unlimited.
100% of the first £2,000 plus 90% of the remainder of the claim.
Trying to keep it simple...0 - Long-term insurance (e.g. pensions and life assurance): unlimited.
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EdInvestor wrote: »Your information is incorrect.EdInvestor wrote: »
Carlyle Capital Corporation ...Almost within the blink of an eye, a business that had borrowed $21bn from the world's biggest banks to invest in high-quality mortgage-backed securities will be gone, liquidated, kaput,"
What are the total available funds of the FSCS.I doubt if they will have enough when a few big hedge funds go bust.
I suspect another government bail out will be necessary.
Oh dear Mr. Darling is going to be going grey…well his eyebrows anyway!
Then it will be the PPF (Pension Protection Fund) holding out the hat, when pension funds are revalued and have massive under-funding.
When the public wake up and start to exit funds en mass the hedge fund business will implode.0 -
TRUSt_NO_1 wrote: »What are the total available funds of the FSCS.I doubt if they will have enough when a few big hedge funds go bust.
When the public wake up and start to exit funds en mass the hedge fund business will implode.
The public are not allowed to invest in hedge funds.Trying to keep it simple...0 -
EdInvestor wrote: »The public are not allowed to invest in hedge funds.
lol, brilliant.
Scaremongers - 0
Investors - 2Mortgage Free in 3 Years (Apr 2007 / Currently / Δ Difference)
[strike]● Interest Only Pt: £36,924.12 / £ - - - - 1.00 / Δ £36,923.12[/strike] - Paid off! Yay!!
● Home Extension: £48,468.07 / £44,435.42 / Δ £4032.65
● Repayment Part: £64,331.11 / £59,877.15 / Δ £4453.96
Total Mortgage Debt: £149,723.30 / £104,313.57 / Δ £45,409.730
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