FSCS and SIPPs, too risky?

dunstonh

I have earlier versions Aviva documents that do not differentiate between internal and external and says it gives the full protection.

So, either Aviva have non-standard insured pensions that differ from the rest of the industry or someone has made a different interpretation as to what insured means. They may be right but it seems strange that they are saying they are not insured funds when they are listed as having the legal structure as "pension fund"

The Friends Life Key features for their PPP (which allowed external funds) doesnt make the differential. Aviva own Friends Life. So, you have two parts of the same company saying something different.

Scottish Widows says fully covered

L&G class all their external funds as insured funds (they have a pdf listing their insured funds:
http://www.legalandgeneral.com/library/pensions/funds-guide/portfolio_plus_summary_insured_funds_post_rdr.pdf
and the key features on page 14 confirm 100% protection.
http://www.legalandgeneral.com/library/pensions/key-features/PPPKeyFeatures.pdf

LV (who have external funds) says:
For long term insurance products, including
investments in LV= Pension Funds, LV= Flexible
Guarantee Funds and LV= Protected Retirement
Plans, the scheme covers 100% of the claim.

The Pru Flexible retirement account mentions external funds not being covered buts its right in that context as its a SIPP. Its funds are provided through reinsurance with Suffolk Life. So, they would not be covered.

I wonder if Aviva have misinterpreted the reinsurance aspect in respect of SIPPs (which would include its own SIPP) and applied to their non-platform PPP (which is not a SIPP but an insured personal pension).

The FSCS website puts the FSCS protection at contract level. It says: if it's directly managed under a life insurance contract.

Now that we have mentioned Aviva in the thread, the Aviva board rep should see this post. Maybe they could refer it to their technical team to take a look as the Aviva position, as currently published, is different to their historical literature and that given by other insurers.

It may seem strange to suggest an insurer is wrong but its quite common. The FSCS itself didnt really know what was or wasnt covered in some areas until it was tested after the credit crunch. A number of providers have flitted between the 50k investment and the insured protection on their documentation over the years. Others, such as Royal London, hedge their bets and do not say what you are covered for and refer you to the FSCS.

Standard Life give a longer description and this may well be the answer. It says that if it is Standard Life that fails and cannot meet its obligations, then you get 100% FSCS protection. However, if it's the fund house that fails and they cannot meet their obligations then you do not get the 100% FSCS protection.

So, we have all sorts of descriptions from the different insurance companies.

zagfles

Malthusian wrote: »

That's because the FSCS website is aimed at people who have lost money due to default of a regulated firm, and in the scenario you describe, you would have lost nothing.

All the shares and investments you held via the Prudential fund would still exist, and the most likely outcome is that another insurer would take over the running of the fund from the liquidator.

Exactly - OP what is it you're worried about? I had quite a lot of my pension in New Star funds and they were on the verge of going bust in 2008, I wasn't worried at all, my investments were perfectly safe as they're ringfenced. In the end the funds got taken over by Henderson. No loss whatsoever. No need for the FSCS.

Susy909

Thanks dunstonh, cannot believe finding a fully protected pension with at least 10 choices would be so stressful, almost impossible.

Susy909

zagfles wrote: »

Exactly - OP what is it you're worried about? I had quite a lot of my pension in New Star funds and they were on the verge of going bust in 2008, I wasn't worried at all, my investments were perfectly safe as they're ringfenced. In the end the funds got taken over by Henderson. No loss whatsoever. No need for the FSCS.

If I had a sipp with HL and had say £70k in a L&G fund and £70k in a Blackrock fund.


If L&G or Blackrock went bust, then I would only get back £50k and have a £20k loss.

zagfles

Susy909 wrote: »

If I had a sipp with HL and had say £70k in a L&G fund and £70k in a Blackrock fund.


If L&G or Blackrock went bust, then I would only get back £50k and have a £20k loss.

Why do you think that? Have you read this thread? Have you read this http://www.hl.co.uk/investment-services/vantage-service/how-safe-is-your-investment

Particularly this bit

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.

Susy909

Ok. But the Aviva pension also had 0.38% fee, with no fund charges on most funds, that was the cheapest overall pension I could find. Worryingly the terms say their "external funds" eg Aviva Blackrock X offer no FSCS protection, final page here:
https://www.aviva.co.uk/adviser/product-literature/files/sp/sp02026c.pdf

Susy909

https://www.aviva.co.uk/retirement/pensions/ says annual charge is from for "Aviva pensions" 0.4%

http://www.aviva-for-advisers.co.uk/adviser/site/public/products/individual-pensions/personal-pension says from 0.7%
and
http://www.aviva-for-advisers.co.uk/adviser/site/public/products/individual-pensions/stakeholder-pension from 0.55%

dunstonh

In reality, this is a very low risk area due to the protections and regulation that has built up over the years. The way the money is held means that its really only a fraud or serious failings that take down the company could cause a loss.

However, you could use no more than £50k per fund house and no limit on internal funds if it really worries you.

AnotherJoe

Susy909 wrote: »

If I had a sipp with HL and had say £70k in a L&G fund and £70k in a Blackrock fund.
If L&G or Blackrock went bust, then I would only get back £50k and have a £20k loss.

As said by others, that's not correct since the funds they hold are rig fenced from creditors.

You are worrying about the wrong thing, far more to lose you £20k is a combination of high fees and poorly performing funds (probabiy much more likely if all you focus on is protection you don't need) . indeed that's a risk that many many people will have encountered unknowingly whilst no doubt they fret about non existent risks. It's like worrying your house will be demolished by a meteor and focussing on building a huge meteor shield whose installation increases the risk the underlying roof will catch fire.

The cheaper meteor shield in this case, that doesn't increase risk of your investment roof catching fire through high costs, is simply not to hold more than £50k in a fund. Waste of time but better than being constrained to a selection of mediocre funds.

Susy909

Not necessarily as the Aviva pension hasa 0.4% fee and some of their funds (the Aviva ones) have a 0% fee, but the choice is really bad.

So are you saying if I had a Blackrock fund worth £100k in my SIPP and Blackrock went bust, I would hold the fund? It seems quite risky