SIPP investment potection

handyman1963

Dear all,


I have asked the providers behind my three separate pension pots for transfer values, with a view to transferring them in to a SIPP. Based on figures I've got so far, the total pot is worth about £160k
I have narrowed down the Sipp providers to a few with fixed-fee charge structures to get the best deal. My concern now is what would happen if the provider went bust - I understand that the FSCS limit is just £50k for investments. What would you advise - two or more sip providers, using the same logic as investing large sums of cash deposits across banks?


Not sure if it makes a difference, but I'll be 55 next year and I'll be withdrawing 25% to put towards a property purchase.


Thanks for reading.


David

dunstonh

My concern now is what would happen if the provider went bust - I understand that the FSCS limit is just £50k for investments.

Are you worried about the SIPP provider or the investment funds. SIPPs have two levels to be aware of.

Persoanal pensions on the other hand have 100% FSCS protection with no upper limit. So, if this concern is of importance to you, then you could use a personal pension instead.

What would you advise - two or more sip providers, using the same logic as investing large sums of cash deposits across banks?

That would be largely pointless. Remember that the assets of the SIPP do not belong to the SIPP provider. The way their are held means they are ringfenced. However, it matters more at investment level (depending on the investments you use and the risks you perceive)

zagfles

See this thread especially the last post:

https://forums.moneysavingexpert.com/discussion/5577163

handyman1963

Thank you both. I was initially concerned about the SIPP provider, but having read the thread from the link above, I think I follow the rules. By the way, HL's information is rather ambiguous- it refers to the FSCS and an 'investment business' going bust - does that mean HL or a fund manager that it uses?
Anyway, as I see it now, there are three levels at which things can go wrong. I'll use fictitious firm names.
I transfer my money in to JoeBloggs SIPP Management, and decide to invest 60k in an actively-managed fund from ACME funds. One of the holdings is XYZ plc.
Scenario 1 - XYZ plc goes into administration and the shares become worthless. The ACME fund goes down in value, but I have no compensation of course
Scenario 2 - the director of ACME funds liquidates the fund's holdings and runs off to South America with all the client cash. I get 50k back from the FSCS, losing 10k
Scenario 3 - The director of Joe Bloggs cashes my cheque and does a runner, and the firm goes bust. What then?


A little extreme perhaps, but feasible nonetheless. Comments?

dunstonh

By the way, HL's information is rather ambiguous- it refers to the FSCS and an 'investment business' going bust - does that mean HL or a fund manager that it uses?

A SIPP can invest in very many things. A good number would be unregulated and get no FSCS protection. So, HL themselves have to talk about their level of FSCS protection. Not the investments you use.

I transfer my money in to JoeBloggs SIPP Management, and decide to invest 60k in an actively-managed fund from ACME funds. One of the holdings is XYZ plc.

I will assume you mean a unit trust or OEIC. Not an IT or ETF or pension funds.

Scenario 3 - The director of Joe Bloggs cashes my cheque and does a runner, and the firm goes bust. What then?

The fraud is at SIPP provider level and if the SIPP provider goes bust, then that particular cheque is covered upto £50k.

Linton

handyman1963 wrote: »

Thank you both. I was initially concerned about the SIPP provider, but having read the thread from the link above, I think I follow the rules. By the way, HL's information is rather ambiguous- it refers to the FSCS and an 'investment business' going bust - does that mean HL or a fund manager that it uses?
Anyway, as I see it now, there are three levels at which things can go wrong. I'll use fictitious firm names.
I transfer my money in to JoeBloggs SIPP Management, and decide to invest 60k in an actively-managed fund from ACME funds. One of the holdings is XYZ plc.
Scenario 1 - XYZ plc goes into administration and the shares become worthless. The ACME fund goes down in value, but I have no compensation of course
Scenario 2 - the director of ACME funds liquidates the fund's holdings and runs off to South America with all the client cash. I get 50k back from the FSCS, losing 10k
Scenario 3 - The director of Joe Bloggs cashes my cheque and does a runner, and the firm goes bust. What then?


A little extreme perhaps, but feasible nonetheless. Comments?

(2) and (3) are feasible in the sense that they dont contradict the laws of physics, but as long as you are using mainstream regulated platforms and fund managers I would say the risks are so unlikely that it is not worth considering them.

Unless you are Warren Buffett the loss of your cheque isnt going to impact a £6Bn company like H-L or a $60Bn company like Blackrock. Which leaves you with the thought that either could be giant scams that dont really invest your money, but squirrel it away unknown and unseen in some off shore bank account and no-one notices, and that all their IT systems simulate a pure fiction. Perhaps a plot for a film, but not a serious risk surely.

You must be ignoring far more likely risks in your everyday life like eating a cheese sandwich without testing it for deadly poisons..

dunstonh

Mainstream regulated investments dont tend to go bump in the night. Unregulated or niche investments are where the real problems are. If you avoid those then you avoid most default/fraud risks.