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    • intowhere
    • By intowhere 6th Sep 17, 11:41 AM
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    intowhere
    Workplace pension FSCS limit - even provider is confused.
    • #1
    • 6th Sep 17, 11:41 AM
    Workplace pension FSCS limit - even provider is confused. 6th Sep 17 at 11:41 AM
    Hello,
    I am looking for some help / guidance.
    I have a workplace pension with my employer, it called a defined contribution pension plan, it is set up under a trust and it is administered by Legal and General (they send out a benefit statement, and answer any questions I have). I am still saving into the pension plan and I won't be retiring for another 20 years. The plan has a dozen of so investments to choose from, all from L&G.


    I wanted to know the level of protection I would have from the FSCS incase anything happened to the trust or to L&G. I have looked on the FSCS website and I have found it confusing.
    Looking at this link https://www.fscs.org.uk/what-we-cover/products/pensions/compensation-limits-for-pensions-retirement-savings/ it says


    Investments: If you choose to place your pension funds directly in investments (other than insurance products), you are protected up to £50,000 per person per firm. This limit will also apply if your claim involves the mis-selling of a pension.


    Pension Life Savings: If you are still building up your pension pot, 100% of your pot will be protected if it's directly managed under a life insurance contract. This would include personal pensions and stakeholder pensions, but not defined-benefit workplace pension schemes, which may be instead covered by the Pension Protection Fund.


    Which one would apply to me; I am still building my pension pot however I don't know if its managed under a life insurance contract or not. Would all of my pension be covered or would it be just £50,000 as I am investing my money into funds.


    I have phoned Legal and General and they person on the phone didn't know and said I should go on FSCS website.




    Any suggestions?
Page 1
    • dunstonh
    • By dunstonh 6th Sep 17, 11:56 AM
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    dunstonh
    • #2
    • 6th Sep 17, 11:56 AM
    • #2
    • 6th Sep 17, 11:56 AM
    If your contract is an insured pension then its 100% protection with no upper limit. If it is not an insured contract then its £50k per person.

    All stakeholder pensions use insured funds as do most personal pensions (there are a handful of PPPs that are SIPP like but limited to UT/OEICs - UT/OEICs are not insured funds). So, they get insurance FSCS protection.

    SIPPs get investment FSCS protection (or no FSCS protection if you use unregulated investments).

    Workplace schemes can fit into either as there are some workplace SIPPs. However, the vast majority are insured. If all the funds available are prefixed with the insurance company name, then that is a good way to tell if they are insured funds.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • intowhere
    • By intowhere 6th Sep 17, 12:46 PM
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    intowhere
    • #3
    • 6th Sep 17, 12:46 PM
    • #3
    • 6th Sep 17, 12:46 PM
    Thanks Dunstonh.


    I have phoned up the FSCS and they advised that in terms of protection its either £50,000 if its an investment pension or £85,000 of its a deposit pension.


    I have searched as much as I can to find if its an insured pension or not, but I cannot find anything. Where is this information normally held?


    The only thing I can go on is that the funds we can invest in are not available on the open market i.e they cannot be purchased via any of the fundsupermarkets. They are specific to those people who have joined the retirement fund. They are prefixed with my employers name, not with the insurance company name.
    • dunstonh
    • By dunstonh 6th Sep 17, 1:25 PM
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    dunstonh
    • #4
    • 6th Sep 17, 1:25 PM
    • #4
    • 6th Sep 17, 1:25 PM
    I have phoned up the FSCS and they advised that in terms of protection its either £50,000 if its an investment pension or £85,000 of its a deposit pension.
    That is not correct. it even contradicts their own website. Phone them again and speak to someone else.

    I have searched as much as I can to find if its an insured pension or not, but I cannot find anything. Where is this information normally held?
    If it uses insured funds like I mentioned.

    The only thing I can go on is that the funds we can invest in are not available on the open market i.e they cannot be purchased via any of the fundsupermarkets. They are specific to those people who have joined the retirement fund. They are prefixed with my employers name, not with the insurance company name.
    That is very unusual for the funds to be in the employers name. Normally they are in the name of the insurance company running the pension (if they are insured funds) or the name of the investment company (if they are investment class). Can you give an example?

    Pension funds cannot be bought on most fund supermarkets (and where they can its usually because the fund supermarket is owned by the insurance company offering them).
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • intowhere
    • By intowhere 6th Sep 17, 1:49 PM
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    intowhere
    • #5
    • 6th Sep 17, 1:49 PM
    • #5
    • 6th Sep 17, 1:49 PM
    Just spoke to another person and they have confirmed that the pension scheme is uninsured.


    Would this be a cause for concern? I have become slightly concerned because if something did happen it would mean all of my savings expect £50k have gone.


    Would it be sensible to set up another pension; if its SIPP I am assuming that I am still covered for another £50k and if I get a stakeholder or a personal pension then I am covered for the full amount.
    • dunstonh
    • By dunstonh 6th Sep 17, 2:38 PM
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    dunstonh
    • #6
    • 6th Sep 17, 2:38 PM
    • #6
    • 6th Sep 17, 2:38 PM
    Would this be a cause for concern? I have become slightly concerned because if something did happen it would mean all of my savings expect £50k have gone.
    everything you do, every day has some degree of risk with a significant consequence if the risk event happens. Crossing the road for example can kill you. But we still do it.

    The risk of a loss on unit linked funds is probably similar to crossing the road and risking death. Its very low risk as a number of protections and risk reduction methods are built in.

    Would it be sensible to set up another pension; if its SIPP I am assuming that I am still covered for another £50k
    As long as its not legal & General as the SIPP provider.

    It wouldnt set up a whole new pension again because of the FSCS.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • sandsy
    • By sandsy 6th Sep 17, 4:14 PM
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    sandsy
    • #7
    • 6th Sep 17, 4:14 PM
    • #7
    • 6th Sep 17, 4:14 PM
    It sounds like you're in a trust based occupational money purchase scheme.
    From the FSCS website(https://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-fscs-protection-for-retirement-savings/):

    What is the protection for occupational pension schemes?

    In the case of an occupational pension scheme providing money purchase benefits, the rules require FSCS to look through the trustees of the scheme to the individual members and treat the members as the claimants. So, if the trustees had invested in an investment product (and the conditions set out above were met) FSCS could pay each member up to £50,000. Where the money purchase scheme is invested in a life insurance contract, FSCS would first try to secure continuity of cover. If this was not possible FSCS would instead pay compensation calculated at 100% of the claim under the life insurance contract with no upper limit.

    Although you choose the investment funds, the trustees purchase units on your behalf and hold them in trust for your beneficial interest. It's not unusual for funds to be specifically labelled for the scheme. The FCSC link suggests £50k per fund applies as the funds are purchased directly by the trustees, not via an insurance product.
    • zagfles
    • By zagfles 6th Sep 17, 4:24 PM
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    • #8
    • 6th Sep 17, 4:24 PM
    • #8
    • 6th Sep 17, 4:24 PM
    Just spoke to another person and they have confirmed that the pension scheme is uninsured.


    Would this be a cause for concern? I have become slightly concerned because if something did happen it would mean all of my savings expect £50k have gone.


    Would it be sensible to set up another pension; if its SIPP I am assuming that I am still covered for another £50k and if I get a stakeholder or a personal pension then I am covered for the full amount.
    Originally posted by intowhere
    FSCS protection isn't as important with investment funds as it is with bank accounts. When you put money into a bank account, the bank uses that money to lend to other people, if the bank goes bust you're in a line of creditors and so FSCS is important.

    But for investment funds, your money is ringfenced in client accounts and if L&G went bust, they couldn't use your investments to pay their debts.

    There is a risk of stuff like fraud whereby someone hacks into their systems and transfers money/investments out, but it would likely to hard to do this on such a scale that L&G go bust and are unable to make good the fraud. It's not something I worry about anyway.
    • Malthusian
    • By Malthusian 6th Sep 17, 4:44 PM
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    Malthusian
    • #9
    • 6th Sep 17, 4:44 PM
    • #9
    • 6th Sep 17, 4:44 PM
    The risk of a loss on unit linked funds is probably similar to crossing the road and risking death.
    Originally posted by dunstonh
    Way way lower than that. Hundreds of people are actually killed crossing the road every year. Whereas to the best of my knowledge no-one has lost money due to a fraud against the kind of scheme the OP is invested in since Maxwell.

    It's more like the risk of a plane crashing into your house while you sleep. It happens, but exceptionally rarely, and since the only way to avoid this risk brings extremely disproportionate misery (live in a cave deep below the ground to be safe from plane crashes / spend all your money and live on state benefits after you retire) no sensible person would base their decisions on it.
    • musicegbdf
    • By musicegbdf 16th Jan 18, 2:05 PM
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    musicegbdf
    Have just started to read this thread and sorry to see some remarks that are a little flippant.
    It is a serious question from the OP , and one with major consequences for an individual.
    I to am concerned at the lack of clarity from the pension industry. There is a great deal of encouragement into drawdown schemes , but little or no warning of the risks. The FSCS told me £85k and Scottish Widows £50k , but both had to go and check.
    With many pension pots going into serious amounts that people have spent a lifetime saving for , there really should be greater transparency . I would say a very high proportion of people would answer they really do not understand pensions.
    We have seen enough big crashes to to never say never.
    I am however interested about "Zagfles " comment that clients money is ringfenced ? Is that really the case for say a Scottish Widows drawdown ? Again trying to cut through the sales blurb , it is hard to find what the saftey nets might eb if any.
    • HappyHarry
    • By HappyHarry 16th Jan 18, 2:39 PM
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    HappyHarry
    Have just started to read this thread and sorry to see some remarks that are a little flippant.
    It is a serious question from the OP , and one with major consequences for an individual.
    I to am concerned at the lack of clarity from the pension industry. There is a great deal of encouragement into drawdown schemes , but little or no warning of the risks. The FSCS told me £85k and Scottish Widows £50k , but both had to go and check.
    With many pension pots going into serious amounts that people have spent a lifetime saving for , there really should be greater transparency . I would say a very high proportion of people would answer they really do not understand pensions.
    We have seen enough big crashes to to never say never.
    I am however interested about "Zagfles " comment that clients money is ringfenced ? Is that really the case for say a Scottish Widows drawdown ? Again trying to cut through the sales blurb , it is hard to find what the saftey nets might eb if any.
    Originally posted by musicegbdf
    All drawdown pots / DC pots ring-fence client money.

    The £50,000 per person limit is not something, as far as i am aware, that has ever been called upon. During the last ten years, we have seen some high-profile fund managers go into administration (think New Star and Gartmore). The funds that these companies ran were untouched, and all the client money remained intact. The funds themselves were passed onto (sold onto) other providers such as Henderson, who took over the running of the funds and responsibility for the client funds.

    L&G have around £900bn assets under management. These assets are totalled and checked each and every day. If the FSCS ever need to pay out £50,000 per person to L&G clients, then that would mean a long-term fraud totalling nearly £1tn. This would, by all practical terms, be utterly impossible to perpetrate.

    The days of Maxwell having access to pension funds are long past.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
    • Malthusian
    • By Malthusian 16th Jan 18, 2:46 PM
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    Malthusian
    The rules on FSCS cover are absolutely clear, totally transparent, and will never be relevant to 99.99% of pension investors.

    We have seen enough big crashes to to never say never.
    Crashes have absolutely nothing to do with the FSCS.

    I am however interested about "Zagfles " comment that clients money is ringfenced ? Is that really the case for say a Scottish Widows drawdown ?
    Yes. The money in your drawdown policy has to be kept separate from Scottish Widows' own money. This is the case with any provider of investment / pension products or funds.
    • Linton
    • By Linton 16th Jan 18, 2:54 PM
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    Linton
    Have just started to read this thread and sorry to see some remarks that are a little flippant.
    It is a serious question from the OP , and one with major consequences for an individual.
    I to am concerned at the lack of clarity from the pension industry. There is a great deal of encouragement into drawdown schemes , but little or no warning of the risks. The FSCS told me £85k and Scottish Widows £50k , but both had to go and check.
    With many pension pots going into serious amounts that people have spent a lifetime saving for , there really should be greater transparency . I would say a very high proportion of people would answer they really do not understand pensions.
    We have seen enough big crashes to to never say never.
    I am however interested about "Zagfles " comment that clients money is ringfenced ? Is that really the case for say a Scottish Widows drawdown ? Again trying to cut through the sales blurb , it is hard to find what the saftey nets might eb if any.
    Originally posted by musicegbdf
    The replies arent flippant. The risk that FSCS protection mitigates against is so unlikely if you are using mainstream regulated schemes that it can be ignored as far less likely than other risks you routinely ignore. FSCS protection doesnt cover crashes in share prices. The risk that your investments disappear is covered by ringfencing. The company running the scheme has no access to your investments to cover their debts, ditto for the fund management company. This is totally different to your bank deposits. The banks own the money in your bank accounts, all you own is a promise from the bank to pay it back.
    • dunstonh
    • By dunstonh 16th Jan 18, 3:01 PM
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    dunstonh
    I to am concerned at the lack of clarity from the pension industry. There is a great deal of encouragement into drawdown schemes , but little or no warning of the risks. The FSCS told me £85k and Scottish Widows £50k , but both had to go and check.
    It is not £85k as its not a deposit. It could be £50k if you are not in insured funds but it will be 100% with no upper limit if you are in insured internal funds.

    Really is not an issue. If you are concerned and not using insured funds then dont go above £50k per fund house and dont use mirror funds. And make sure you take extra care as you walk down the road in case something fall out of an aeroplane and hits you on the head. (similarly extreme case of taking care).
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • musicegbdf
    • By musicegbdf 16th Jan 18, 5:41 PM
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    musicegbdf
    The rules on FSCS cover are absolutely clear, totally transparent, and will never be relevant to 99.99% of pension investors.



    Crashes have absolutely nothing to do with the FSCS.



    Yes. The money in your drawdown policy has to be kept separate from Scottish Widows' own money. This is the case with any provider of investment / pension products or funds.
    Originally posted by Malthusian
    Thanks
    Shame neither SW or the FSCS did not tell me about the ring fencing
    To be clear I suffered from a previous employer

    e who raided the pension fund legally and have had to top up for the last twenty years so very sensitive . We are not all financial experts and other than my pension I have never been able to save as running my family took all my reserves . I do think comments about getting run over or falling out of planes is flippant , but maybe I am not so clever as others .
    Pensions are a minefield for ordinary people and we have to trust employers and the financial industry which does not have such a good reputation in recent years.
    Anyway again thks to those confirming the ringfencing , but again I think it should be made clear that a drawdown is not treated as a pension , but a separate investment.
    Last edited by musicegbdf; 16-01-2018 at 5:46 PM. Reason: Spelling
    • dunstonh
    • By dunstonh 16th Jan 18, 5:56 PM
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    dunstonh
    ut again I think it should be made clear that a drawdown is not treated as a pension , but a separate investment.
    it is treated as a pension.

    If you used insured funds you get 100% FSCS protection
    If you use UT/OEICs you get £50k FSCS protection
    If you use ETFs, Shares, ITs you get no FSCS protection

    If you hold all of those things in a pension in drawdown then it is still a pension. However, only one of those is using pension funds.
    Pensions are a minefield for ordinary people and we have to trust employers and the financial industry which does not have such a good reputation in recent years.
    Certain parts of the financial industry have had issues but most of it just ticks along fine. There is no need to be paranoid about everything. Perhaps you should be using a less advanced option is you are struggling with it. You should invest within your understanding and maybe using a simple personal pension that invests in insured funds is the best option for you? Simple options are not bad and advanced options are not better (there are plenty better than SW).
    Last edited by dunstonh; 16-01-2018 at 5:59 PM.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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