Are pension providers covered by the FSCS?

fullahmoolah

Hi could someone tell me if pension providers are covered by the FS compensation scheme? I don't know if they fall under the heading of "institution" or not. And is it covered up to the full £85k?

dunstonh

Yes they are. However, they wont be covered by the deposit scheme as that only applies to deposits. They are mostly covered by the investment scheme or the insurance scheme (depending on type of pension).

magpiecottage

A different protection scheme applies to defined benefit schemes (i.e. final salary or career average schemes).

System

Who bears the risk in a self-invested pension scheme - the pension provider, or are the pension investments assigned exclusively to the pension holder?

mania112

Clifford_Pope wrote: »

Who bears the risk in a self-invested pension scheme - the pension provider, or are the pension investments assigned exclusively to the pension holder?

courtesy of Suffolk Life:

SIPP operator defaults
Where the SIPP operator defaults it is for the investor to
make a claim under the FSCS.

Where the SIPP is a contract of insurance, the maximum
amount an investor can claim for under the FSCS, in the
event of the operator defaulting, is 90% of the value of the
SIPP. This amount is currently uncapped.

Where the SIPP is a trust based arrangement, the maximum
amount that an investor can claim for under the FSCS in the
event of the operator defaulting is £50,000.

Underlying assets of a SIPP
Where the custodian or provider of the underlying assets
fails then the SIPP operator or trustee can potentially claim
under the FSCS on behalf of the scheme member.

The level of compensation payable depends on the status of
the custodian or provider, the nature of the investment and
the eligibility under the FSCS. In addition, should you hold
assets personally with the same provider this may restrict the
level of compensation payable to the SIPP.

Deposit accounts
The current limit is £85,000 per individual SIPP investor per
banking group.

Insurance based investments
In the event that an insurance company provider of a trustee
investment plan or similar product fails then:
» Under a Deed poll scheme no claim can be made
» Under a Master trust scheme the insurance claim limits
would apply. That is, 90% of the claim with no upper cap.

Other investments
If the firm providing the investment is regulated by the FSA
then the level of potential claim is up to £50,000.

If the investment firm providing the investments is not
regulated by the FSA, then no claim can be made against the
FSCS. For investments provided by European firms who are
regulated by their home state regulator the SIPP operator and
trustee may be able to claim but this is not certain.

Summary
To understand how FSCS protection relates to SIPPs, one
must first establish the legal structure of the SIPP scheme.
The level of investor protection offered to SIPP investors will
depend on the way the SIPP is established and its legal
structure. The protection also depends on how the
underlying investments are held.

Given the importance to investors of compensation
arrangements it’s important that advisers fully understand the
legal structure of any SIPP operator that they do business
with – and also fully appreciate the potential implications and
impact on compensation arrangements

Essentially the SIPP operator is covered, but you must be invested in FSA-regulated funds.

System

I'm not quite sure I follow all that.
My SIPP invests in our company premises. If the pension provider collapsed would "my " asset still be owned by my own personal pension pot, or would it go into the general pension company kitty for distibution to creditors?

Linton

Clifford_Pope wrote: »

I'm not quite sure I follow all that.
My SIPP invests in our company premises. If the pension provider collapsed would "my " asset still be owned by my own personal pension pot, or would it go into the general pension company kitty for distibution to creditors?

Your pension pot is allocated to you, its not accessible by anyone else. So the only risks being considered are essentially fraud or criminal negligence with cash on the part of the pension provider.