What if Hargreaves Lansdown went bust?

Wibble

First - I don't expect they will! But it's a question that has occurred to me as I want to start adding more money to my SIPP with them - basically, should I be at all concerned about too many eggs in one basket?

HL hold my main pension money in a SIPP, where I can buy and sell funds and monitor it online. But what would happen if they went under? I don't mean so much about what guarantees the government may give for pensions, or the likelihood of it being allowed to happen.

What I mean is - are the funds in the SIPP in my name and my property, or if HL went under could my investments be at risk?

I'm looking at adding more to a pension and wondering whether I ought to be considering doing it with another company so I don't have everything with one company.

DavidLaGuardia

The risk of the invetment is not determined by either the pension company, or when different the company that manage the investment. The risk is determined by specific shares bonds or deposit funds that make up the fund. In the case of deposit funds there is admittedly a risk within one issuer, but that is the bank or institution in question which are rarely the pension administrator when it comes to SIPPs.

Hargreaves and many other pension providers simply administer the funds If it went bust, its receivers would be selling the accounts to another company to look after.

Splitting your funds between two adminsitrators doesn't really reducethe risk. If you do not want to keep "all your eggs in one basket" either you or an Independent Fiancial Adviser can chose diffferent funds in different asset classes within a carefully chosen pension plan that meets your requirements at a competetive cost.

Wibble

Thanks David!

Yes, I understand that my investment can go up or down depending on the selection of funds I have - I'm ok with that and have a good spread of investments in my SIPP. Sadly not doing great in the current market, but on the upside it's a much better time to invest more!

What I mean is what would happen if HL went under with huge debts - are my funds at risk?

E.g. if I had £50k in a UK bank and that went under, in theory I'm protected up to 35k then I could lose the rest. It may well be that that wouldn't be allowed to happen, but it could. If the bank holding my money got into trouble I could lose (in this example) £15k.

So what happens with a company like HL that holds my money in the form of funds? If they got into trouble with big debts are my funds at risk? Or are the funds in my name? I.e. they do the dealing of the buying and selling but the funds are in my name and are totally safe?

Or is it just unlikely, as unlike a bank they don't run up big debts that could land them in trouble?

It is confusing, as in theory money in a bank would be in my name yet I could still lose anything over 35k, so by my funds being in 'my name' I mean no way that I could lose them no matter what trouble HL could theoretically get into?

Debt_Free_Chick

Wibble wrote: »

HL hold my main pension money ....

What I mean is - are the funds in the SIPP in my name and my property,

You need to check the small print. I'd expect that the investments HL buy are held by a nominee. This is a kind of "trustee". The nominee/trustee holds those investments on your behalf, so they are not available to the administrator/liquidator if HL went bust.

Contact them and ask the question. I'll bet you're not the first customer to have done this in the past couple of weeks and, if they have any nous, their marketing people will have prepared a stock-standard answer

EdInvestor

Money is SIPPs is subject to the compensation limits applying to to the underlying investments (48k) and cash (35k), not to the pension limits.

The compo would be triggered if the underlying holder (eg fund management co or bank) went bust. Investment funds are ringfenced in nominee accounts from exposure to HL, but I am not sure of the actual mechanics of the cash account - IIRC they use a selection of banks to spread risk.

DavidLaGuardia

Wibble wrote: »

Thanks David!

Yes, I understand that my investment can go up or down depending on the selection of funds I have - I'm ok with that and have a good spread of investments in my SIPP. Sadly not doing great in the current market, but on the upside it's a much better time to invest more!

What I mean is what would happen if HL went under with huge debts - are my funds at risk?

E.g. if I had £50k in a UK bank and that went under, in theory I'm protected up to 35k then I could lose the rest. It may well be that that wouldn't be allowed to happen, but it could. If the bank holding my money got into trouble I could lose (in this example) £15k.

So what happens with a company like HL that holds my money in the form of funds? If they got into trouble with big debts are my funds at risk? Or are the funds in my name? I.e. they do the dealing of the buying and selling but the funds are in my name and are totally safe?

Or is it just unlikely, as unlike a bank they don't run up big debts that could land them in trouble?

It is confusing, as in theory money in a bank would be in my name yet I could still lose anything over 35k, so by my funds being in 'my name' I mean no way that I could lose them no matter what trouble HL could theoretically get into?

I am not being rude, but you have not bothered to read my previous answer properly. Furthermore all this talk of compensation limits is pretty irrelevant in this case

In a nutshell:

If Hargreaves go bust you will not lose your money, your money is NOT invested in Hargreaves. They are just an administrator, If they go down someone else takes over the funds.

sdooley

If HL were to go bust it would affect their pensions in that the trustee would probably be obliged to go to another provider who might have higher charges. Unless there is Maxwell-style fraud, pension funds themselves won't have been tapped into. Is there any indication HL are in trouble?

DavidLaGuardia

sdooley wrote: »

If HL were to go bust it would affect their pensions in that the trustee would probably be obliged to go to another provider who might have higher charges.

Yes this is a possibility (although this is not on the scale of was feared by the questioner). If this were to be the case there is likely to be a competetive alternative out there to transer to. Also I am not aware that HL are in trouble to start with

jamesd

Wibble wrote: »

are the funds in the SIPP in my name and my property...?

Yes, they are. See How safe is your investment?:

"All client money is held on deposit in Trust accounts, so that any creditors of Hargreaves Lansdown would have no legal right to it"

"Stock you hold with us is held by Hargreaves Lansdown Nominees Limited, a non-trading company which is a member of the Hargreaves Lansdown Group of Companies. As a non-trading company it cannot run up liabilities of its own and Hargreaves Lansdown accepts full liability for any default by our nominee company. All your assets are held in an account designated with your name."

"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. The time that the FSCS does not protect you is if one of the underlying stocks within a fund manager’s portfolio goes bust."

So if a fund holds BP shares and BP goes bust, you take that loss because that's just market action as usual and the value of the fund would drop a bit. But if the fund management company went bust, you'd still own rights to the BP shares via the trustee or depository company.

Debt_Free_Chick

jamesd wrote: »

Yes, they are. See How safe is your investment?:

"All client money is held on deposit in Trust accounts, so that any creditors of Hargreaves Lansdown would have no legal right to it"

"Stock you hold with us is held by Hargreaves Lansdown Nominees Limited, a non-trading company which is a member of the Hargreaves Lansdown Group of Companies. As a non-trading company it cannot run up liabilities of its own and Hargreaves Lansdown accepts full liability for any default by our nominee company. All your assets are held in an account designated with your name."

"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. The time that the FSCS does not protect you is if one of the underlying stocks within a fund manager’s portfolio goes bust."

So if a fund holds BP shares and BP goes bust, you take that loss because that's just market action as usual and the value of the fund would drop a bit. But if the fund management company went bust, you'd still own rights to the BP shares via the trustee or depository company.

I had hoped that would be the case.

Debt_Free_Chick wrote: »

I'd expect that the investments HL buy are held by a nominee. This is a kind of "trustee". The nominee/trustee holds those investments on your behalf, so they are not available to the administrator/liquidator if HL went bust.

purch

Of course if all your SIPP was invested in their stock, then you would be up !!!!!! creek :eek:

Other than that, and a load of hassle and paperwork, pas de problem !!!!