Pensions - FSCS compensation

Puzzler

Martin describes the rules relating to FSCS compensation re pensions as follows:

"- important to understand, we're talking about ‘saving’ not ‘investing’; if you put money in stocks and shares, funds that invest in them, and pension funds, then you’ve got a “risk based” investment NOT savings, and a different level of protection applies.

If the product provider of an investment goes bust (e.g a bank offering a Shares ISA), you'll get the first £30,000 back, plus 90% of the next £20,000 (a total of £48,000); while pension and life assurance funds get the first £2,000 fully covered, plus 90% of everything else in them."

The first paragraph seems to suggest that a pension fund is classed as an "investment", while the second paragraph seems to be saying that an "investment" gets £48,000 back, while a "pension fund" gets £2,000 plus 90% of the rest. How can a the pension fund/investment in the first para be subject to two different calculations in the second? Which calculation is intended by the FSCS for a pension fund?

It's important, because people often have, over the years, a lot more invested in their pension fund than in ordinary savings. A £200,000 pension fund, for example, could well only produce around £10,000 annual pension income, and if only £48,000 is covered, this will only produce some £2,400 annual pension income.

When I looked at the FSCS website, I first thought that the £48,000 calculation applied to pension funds, and the £2,000 plus 90% calculation to pensions in payment out of those funds. But I think I must be wrong on this!

Thanks

Puzzler

dunstonh

Personal pensions and stakeholders from insurance companies come under the FSCS insurance protection. SIPPs come under investment protection.

There is some confusion on this with the FSCS themselves and the pensions advisory service (with whom i got more follow up today on this subject - which is being covered in another thread). The FSCS have confirmed that insurance applies but it took 3 phone calls and a referral up the line for them to change their opinion from investments to insurance.

Its irrelevant anyway, personal pensions and stakeholder pensions investing in unit linked funds are set up under trust and the units are ringfenced away from the insurer. The exception is conventional with profits funds which do not benefit from that.