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  • FIRST POST
    • Susy909
    • By Susy909 7th Sep 17, 7:43 PM
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    Susy909
    FSCS and SIPPs, too risky?
    • #1
    • 7th Sep 17, 7:43 PM
    FSCS and SIPPs, too risky? 7th Sep 17 at 7:43 PM
    1.If my hargreaves SIPP invests in an insurance company fund for example Prudential 20-55 Dynamic, and Prudential went bust, would I be completely covered?

    2. If invested directly with prudential, what is the maximum FSCS cover per fund?


    I can't find these answers anywhere, the fscs website isn't detailed enough
Page 1
    • dunstonh
    • By dunstonh 7th Sep 17, 9:06 PM
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    dunstonh
    • #2
    • 7th Sep 17, 9:06 PM
    • #2
    • 7th Sep 17, 9:06 PM
    1.If my hargreaves SIPP invests in an insurance company fund for example Prudential 20-55 Dynamic, and Prudential went bust, would I be completely covered?
    HL do not offer insured funds on their SIPP (same with most SIPPs). A fund with what you think is an insurance company name is not an insurance company and is not insured funds with SIPPs. Think of them as a fund house just as you would any other fund house.

    2. If invested directly with prudential, what is the maximum FSCS cover per fund?
    100% with no upper limit. This is because the fund woulld be held within an insured contract using insured funds. It would not be using the unit trust/oeic version.
    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 a Financial Adviser local to you.
    • zagfles
    • By zagfles 7th Sep 17, 11:18 PM
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    zagfles
    • #3
    • 7th Sep 17, 11:18 PM
    • #3
    • 7th Sep 17, 11:18 PM
    If Prudential went bust, their creditors would have no claim on your assets if in UT/OEIC's. Client assets are ringfenced, it's not like banks where your deposits are lent out and if the bank goes bust you're just in a line of creditors.

    I'm not sure about With Profits type funds, they might be different.
    • Susy909
    • By Susy909 8th Sep 17, 8:32 AM
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    Susy909
    • #4
    • 8th Sep 17, 8:32 AM
    • #4
    • 8th Sep 17, 8:32 AM
    Thanks, the FSCS website does not give enough info
    • Malthusian
    • By Malthusian 8th Sep 17, 11:34 AM
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    Malthusian
    • #5
    • 8th Sep 17, 11:34 AM
    • #5
    • 8th Sep 17, 11:34 AM
    That's because the FSCS website is aimed at people who have lost money due to default of a regulated firm, and in the scenario you describe, you would have lost nothing.

    All the shares and investments you held via the Prudential fund would still exist, and the most likely outcome is that another insurer would take over the running of the fund from the liquidator.
    • Susy909
    • By Susy909 8th Sep 17, 4:56 PM
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    Susy909
    • #6
    • 8th Sep 17, 4:56 PM
    • #6
    • 8th Sep 17, 4:56 PM
    This is the most confusing thing I have ever done.

    I am now looking at the Aviva personal pension, but it offers 120 funds, not all from aviva, if aviva went bust, FSCS cover up to 100% because its from an insurance provider, is this right?
    • dunstonh
    • By dunstonh 8th Sep 17, 5:15 PM
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    dunstonh
    • #7
    • 8th Sep 17, 5:15 PM
    • #7
    • 8th Sep 17, 5:15 PM
    I am now looking at the Aviva personal pension, but it offers 120 funds, not all from aviva, if aviva went bust, FSCS cover up to 100% because its from an insurance provider, is this right?
    Depends on the Aviva contract. If you have an Aviva SIPP and the funds are not prefixed with Aviva (or have a series number at the end) then these are probably unit trust/OEICs and do not get 100% FSCS protection.

    If its the Aviva personal pension (or one of their earlier versions) then all the funds should have an Aviva prefix. Even if the master fund is one issued by another fund house. e.g. Aviva Invesco Perpetual Distribution S6 is an insured fund. Whereas Invesco Perpetual Distribution (share class Z) is a UT/OEIC and gets 50k protection.
    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 a Financial Adviser local to you.
    • Susy909
    • By Susy909 8th Sep 17, 5:21 PM
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    Susy909
    • #8
    • 8th Sep 17, 5:21 PM
    • #8
    • 8th Sep 17, 5:21 PM
    "The Aviva Invesco Perpetual Distribution S6", in the factsheet says it is an external fund. Apparently these are only covered to 50k.

    Also, the Aviva multi asset is classed as an external fund in the factsheet, as handled by some kind of AViva investment company, not the insurance company.
    • dunstonh
    • By dunstonh 8th Sep 17, 6:07 PM
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    dunstonh
    • #9
    • 8th Sep 17, 6:07 PM
    • #9
    • 8th Sep 17, 6:07 PM
    "The Aviva Invesco Perpetual Distribution S6", in the factsheet says it is an external fund. Apparently these are only covered to 50k.
    It is an external fund. However, it is an insured fund and has 100% FSCS protection

    Also, the Aviva multi asset is classed as an external fund in the factsheet, as handled by some kind of AViva investment company, not the insurance company.
    That fund is available in pension fund form and unit trust/OEIC form. So, depending on which one you use, it will either be 100% FSCS protection or 50k.

    As I mentioned higher up, Aviva are not just an insurer. They also have an investment company, and a number of non-insurance companies.
    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 a Financial Adviser local to you.
    • Susy909
    • By Susy909 8th Sep 17, 6:41 PM
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    Susy909
    Page 10 says external funds are not covered at all

    https://www.aviva.co.uk/adviser/product-literature/files/in/in13091c.pdf

    Example of "Aviva" fund the factsheet says it is external
    http://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Documents.aspx?type=packet_lp_fund_unit_doc_factsh eet&docid=3d3e8309-24f8-4bb7-b332-b0fbd97482e9&user=flweb&language=en-GB&track1=ab667189-7cfd-4822-9194-43973daac467&track2=AvivaForAdvisersUnsecure
    • Susy909
    • By Susy909 8th Sep 17, 6:45 PM
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    Susy909
    https://www.aviva.co.uk/adviser/product-literature/files/gn/gn20431.pdf

    Last page also says similar
    • dunstonh
    • By dunstonh 8th Sep 17, 7:41 PM
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    dunstonh
    I have earlier versions Aviva documents that do not differentiate between internal and external and says it gives the full protection.

    So, either Aviva have non-standard insured pensions that differ from the rest of the industry or someone has made a different interpretation as to what insured means. They may be right but it seems strange that they are saying they are not insured funds when they are listed as having the legal structure as "pension fund"

    The Friends Life Key features for their PPP (which allowed external funds) doesnt make the differential. Aviva own Friends Life. So, you have two parts of the same company saying something different.

    Scottish Widows says fully covered

    L&G class all their external funds as insured funds (they have a pdf listing their insured funds:
    http://www.legalandgeneral.com/library/pensions/funds-guide/portfolio_plus_summary_insured_funds_post_rdr.pdf
    and the key features on page 14 confirm 100% protection.
    http://www.legalandgeneral.com/library/pensions/key-features/PPPKeyFeatures.pdf

    LV (who have external funds) says:
    For long term insurance products, including
    investments in LV= Pension Funds, LV= Flexible
    Guarantee Funds and LV= Protected Retirement
    Plans, the scheme covers 100% of the claim.


    The Pru Flexible retirement account mentions external funds not being covered buts its right in that context as its a SIPP. Its funds are provided through reinsurance with Suffolk Life. So, they would not be covered.

    I wonder if Aviva have misinterpreted the reinsurance aspect in respect of SIPPs (which would include its own SIPP) and applied to their non-platform PPP (which is not a SIPP but an insured personal pension).

    The FSCS website puts the FSCS protection at contract level. It says: if it's directly managed under a life insurance contract.

    Now that we have mentioned Aviva in the thread, the Aviva board rep should see this post. Maybe they could refer it to their technical team to take a look as the Aviva position, as currently published, is different to their historical literature and that given by other insurers.

    It may seem strange to suggest an insurer is wrong but its quite common. The FSCS itself didnt really know what was or wasnt covered in some areas until it was tested after the credit crunch. A number of providers have flitted between the 50k investment and the insured protection on their documentation over the years. Others, such as Royal London, hedge their bets and do not say what you are covered for and refer you to the FSCS.

    Standard Life give a longer description and this may well be the answer. It says that if it is Standard Life that fails and cannot meet its obligations, then you get 100% FSCS protection. However, if it's the fund house that fails and they cannot meet their obligations then you do not get the 100% FSCS protection.

    So, we have all sorts of descriptions from the different insurance companies.
    Last edited by dunstonh; 08-09-2017 at 10:55 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 a Financial Adviser local to you.
    • zagfles
    • By zagfles 8th Sep 17, 9:37 PM
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    zagfles
    That's because the FSCS website is aimed at people who have lost money due to default of a regulated firm, and in the scenario you describe, you would have lost nothing.

    All the shares and investments you held via the Prudential fund would still exist, and the most likely outcome is that another insurer would take over the running of the fund from the liquidator.
    Originally posted by Malthusian
    Exactly - OP what is it you're worried about? I had quite a lot of my pension in New Star funds and they were on the verge of going bust in 2008, I wasn't worried at all, my investments were perfectly safe as they're ringfenced. In the end the funds got taken over by Henderson. No loss whatsoever. No need for the FSCS.
    • Susy909
    • By Susy909 8th Sep 17, 9:40 PM
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    Susy909
    Thanks dunstonh, cannot believe finding a fully protected pension with at least 10 choices would be so stressful, almost impossible.
    • Susy909
    • By Susy909 8th Sep 17, 9:45 PM
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    Susy909
    Exactly - OP what is it you're worried about? I had quite a lot of my pension in New Star funds and they were on the verge of going bust in 2008, I wasn't worried at all, my investments were perfectly safe as they're ringfenced. In the end the funds got taken over by Henderson. No loss whatsoever. No need for the FSCS.
    Originally posted by zagfles
    If I had a sipp with HL and had say £70k in a L&G fund and £70k in a Blackrock fund.


    If L&G or Blackrock went bust, then I would only get back £50k and have a £20k loss.
    • zagfles
    • By zagfles 8th Sep 17, 9:50 PM
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    zagfles
    If I had a sipp with HL and had say £70k in a L&G fund and £70k in a Blackrock fund.


    If L&G or Blackrock went bust, then I would only get back £50k and have a £20k loss.
    Originally posted by Susy909
    Why do you think that? Have you read this thread? Have you read this http://www.hl.co.uk/investment-services/vantage-service/how-safe-is-your-investment

    Particularly this bit
    Unit trusts and OEICs use a trustee or depositary to actually hold the title to the underlying stocks they hold in their funds. This means that if the fund manager gets into financial difficulty your assets are protected from their creditors.
    • Susy909
    • By Susy909 8th Sep 17, 10:02 PM
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    Susy909
    Ok. But the Aviva pension also had 0.38% fee, with no fund charges on most funds, that was the cheapest overall pension I could find. Worryingly the terms say their "external funds" eg Aviva Blackrock X offer no FSCS protection, final page here:
    https://www.aviva.co.uk/adviser/product-literature/files/sp/sp02026c.pdf
    • Susy909
    • By Susy909 8th Sep 17, 10:14 PM
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    Susy909
    https://www.aviva.co.uk/retirement/pensions/ says annual charge is from for "Aviva pensions" 0.4%

    http://www.aviva-for-advisers.co.uk/adviser/site/public/products/individual-pensions/personal-pension says from 0.7%
    and
    http://www.aviva-for-advisers.co.uk/adviser/site/public/products/individual-pensions/stakeholder-pension from 0.55%
    • dunstonh
    • By dunstonh 8th Sep 17, 10:59 PM
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    dunstonh
    In reality, this is a very low risk area due to the protections and regulation that has built up over the years. The way the money is held means that its really only a fraud or serious failings that take down the company could cause a loss.

    However, you could use no more than £50k per fund house and no limit on internal funds if it really worries you.
    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 a Financial Adviser local to you.
    • AnotherJoe
    • By AnotherJoe 9th Sep 17, 12:13 AM
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    AnotherJoe
    If I had a sipp with HL and had say £70k in a L&G fund and £70k in a Blackrock fund.
    If L&G or Blackrock went bust, then I would only get back £50k and have a £20k loss.
    Originally posted by Susy909
    As said by others, that's not correct since the funds they hold are rig fenced from creditors.

    You are worrying about the wrong thing, far more to lose you £20k is a combination of high fees and poorly performing funds (probabiy much more likely if all you focus on is protection you don't need) . indeed that's a risk that many many people will have encountered unknowingly whilst no doubt they fret about non existent risks. It's like worrying your house will be demolished by a meteor and focussing on building a huge meteor shield whose installation increases the risk the underlying roof will catch fire.

    The cheaper meteor shield in this case, that doesn't increase risk of your investment roof catching fire through high costs, is simply not to hold more than £50k in a fund. Waste of time but better than being constrained to a selection of mediocre funds.
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