AIG - Pensions lost if they goi bust...

dunstonh

Is DH sure the PAS is wrong>

Well either the PAS is wrong or the FSCS and the insurance companies are wrong. I would go by the FSCS as its their scheme and the pension KFDs show it as life and pensions applying to pensions (funnily enough).

And why should a Guaranteed Income Bond at AIG ( a cash- like "investment" ) attract pension type protection?

It wouldnt unless it was under the life assurance wrapper. When GEBs first came out, a lot of them were on the life assurance wrapper. It was only when the introduction of ISAs came in that many of them moved off the life wrapper to allow them to be placed in ISAs.

Remember that with conventional with profits funds you are totally reliant on the solvency of the insurance company. With unit linked funds though the money is invested into assets and ring fenced away from the insurance company. With external funds especially, the money is in a sub fund of the main UT fund run by the external fund manager.

EdInvestor

If you look at the FSA handbook, PPs and stakeholders (like SIPPs) appear to come under designated investment business (limit 48k) not pension business (unlimited). One suspects the pension protection may only apply to WP funds, and then only to the guaranteed portion.

http://fsahandbook.info/FSA/glossary-html/handbook/Glossary/D?definition=G283

dunstonh

If you look at the FSA handbook, PPs and stakeholders (like SIPPs) appear to come under designated investment business (limit 48k) not pension business (unlimited). One suspects the pension protection may only apply to WP funds, and then only to the guaranteed portion.

Designated investment business is regulated financial services transactions. It has nothing to do with FSCS protection.

The following contracts have life and pensions protection (100% on first £2000 and 90% on rest). This is confirmed by looking at their own literature:

Friends Provident personal pensions (PPP) and stakeholder pensions (SHP)
Skandia PPPs (including Selestia)
Norwich Union PPPs and SHPs
Clerical Medical PPPs and SHPs
Legal & General PPPs and SHPs
Civil services pension scheme AVCs
AXA PPP and SHP
Prudential PPP, SHP and teachers AVCs
Cofunds SIPP (at provider level and on pension funds, not direct investments)

Need I go on...

The FSCS say FSCS protection on pensions comes under the insurance section. The pension providers say it does. Its only a paragraph on the PAS website that says otherwise and it is cleary wrong.

And as mentioned, for unit linked contracts it doesnt matter. The pension fund is ringfenced and held in trust so if HBOS failed your nest egg is safe.(excuse copy and paste on that last bit that mentioned HBOS)

EdInvestor

I don't think you're getting my point.

dunstonh wrote: »

With unit linked funds though the money is invested into assets and ring fenced away from the insurance company. With external funds especially, the money is in a sub fund of the main UT fund run by the external fund manager.

So with these funds which are ring fenced away from the insurance company, what happens if the unit trust provider fails?Are they subject to the investment business limit (like SIPPs) or the pension fund limit?

Is there a difference between being invested in a pension fund within a pension wrapper and a unit trust (ie external fund) within a pension wrapper?

Note that although a SIPP is clearly a pension, it gets investment protection, not pension protection.

It seems the FSCS treats pensions as "investments" before benefits are taken:

http://forums.moneysavingexpert.com/showpost.html?p=9293727&postcount=7

EdInvestor

FSCS casts doubt over level of safety of so called guaranteed products beyond return of original capital.

http://www.timesonline.co.uk/tol/money/savings/article4793684.ece

"Structured products" protection outlook looks even more shaky.

dunstonh

EdInvestor wrote: »

FSCS casts doubt over level of safety of so called guaranteed products beyond return of original capital.

http://www.timesonline.co.uk/tol/money/savings/article4793684.ece

"Structured products" protection outlook looks even more shaky.

That is a very poorly written article. It refers to savers when it actually means investors. Plus it makes a point of saying that future returns wont be protected. Well, excuse me but are any investments protected by the FSCS for future returns (including savings)?

GEBs have never been classed as the same risk level as cash. You find most GEBs are at the 3-5 level on a 1-10 risk scale (1 = cash). They are an investment product. The ones at risk have been the higher risk versions.

And for the novice investor reading these posts, this has nothing to do with pensions, even though its in the pension section.

Debt_Free_Chick

But to what level are they protected?For instance in a SIPP , the underlying investments held in a nominee account attract only the savings limit (ie 48k) not the uncapped pension limit, though a SIPP is undoubtedly a pension.

The assets held in a nominee account do not belong to the SIPP/Pension provider. Therefore, the administrator/receiver/liquidator has no access to them. The assets in the nominee account cannot be "grabbed" and used to pay amounts owed by the bankrupt company - they are not the bankrupt company's property.

......is my understanding.