Are pension funds as safe as bank deposits?

sh856531

Hi guys,

I have a question that's been bugging me for quite a while now. I put a fair amount of money into a pension (Scottish Equitable Universal Lifestyle Collection) but I haven't heard anything from the government or anyone else about whether this is safe or not? Everyone's just talking about bank deposits.

Now I'm hoping that this means that pensions are just incredibly safe and can't go bust, or even if they can there's an insurance fund that will pay out and so on - but can someone tell me explicitly whether my pension is safe and if so under what mechanism is it protected?

You see the thing is, lots of people are (rightly) worried about losing the money they have on deposit - but I would have thought that if you are over say 35, the vast bulk of your "savings" would be sitting in some fund somewhere.

To give a concrete example, a colleague of mine has £95000 in his pension fund and £3000 in savings. Now whilst it would be very bad to lose 3K, I'd be much much more worried about the 95K.

Can anyone advise me on why more people aren't talking about this?

Thanks to anyone who can advise

Very best regards

Simon

dunstonh

If your pension is in a personal pension or stakeholder pension then you have higher protection than deposits. They fall under the insurance protection scheme. 100% of first £2000 and 90% of the rest with no upper limit.

If you pension is in a SIPP you get less protection as its classed as an investment and falls under the investment protection scheme. That is 100% of first £30k and 90% of next 20k.

Can anyone advise me on why more people aren't talking about this?

As you can see the protection is higher. Also, if you are investing in unit linked funds then you really dont have much to be concerned with as you are not placing your money in that company. They are only really effectively acting as an adminstrator. Most unit linked contracts will have the money ringfenced and under a trust or nominee arrangement.

collingwood21

Forgive me if this is a stupid question, but what about final salary occupational schemes? What sort of protection do these have?

dunstonh

The have different protection under the pensions protection scheme. That is funded by final salary pension schemes still running. Whilst their behind-the-scenes investing would have been hit, most would have learned their lesson from the tech stocks crash and be using sector/asset allocation with their investing and risk assessment based on shortfalls and employer/employee contribution levels.

Events like these can actually be very beneficial in the long run as they like others paying in monthly are able to buy investments cheaper and in the long term gain from that. Its only the short term where there is the pain.

bootman

:rolleyes:My pension pot was 80K a few weeks ago now it's showing as 66K. I am 37.

Its with Standard Life a Cautious managed fund. Is there anything I should be or can do to stop it dropping further?

dunstonh

Its with Standard Life a Cautious managed fund. Is there anything I should be or can do to stop it dropping further?

Investments zig zag. They always have. They always will. They dropped by a greater amount 6-8 years ago. Did you do anything then?

You are 37 years old and you will probably see another 12 stockmarket bear markets before you retire. You have already seen around 3 in your working life.

Personally, i would be more concerned with the fact that you have good value for your retirment pot but have it in a basic contract and all of it in a jack of all trades bog standard managed fund.