Is it safer to split pension funds between providers?

papercontracts

Hi,
I have SIPP funds with three providers. Each has different costs. I'm considering transferring all the funds into the provider with the lowest costs (Interactive Investor). Is my money safer if I keep the funds split between providers? I plan to have the funds invested in a low-cost tracker (eg one of the Vanguard LifeStrategy funds) whichever platform(s) I use.
Thanks.

SonOf

Is it safer to split pension funds between providers?

not really.

I plan to have the funds invested in a low-cost tracker (eg one of the Vanguard LifeStrategy funds) whichever platform(s) I use.
Thanks.

by limiting yourself to one fund house, you would still have £85k FSCS protection in total whether you used one SIPP or 10 SIPPs as its £85k per fund house.

The only thing you would gain if you split SIPP administrators is if there was a fraud at the SIPP administrator that they could not cover. However, by using a well-capitalised mainstream provider, you reduce the risks of that significantly.

papercontracts

Thanks for your reply. But are the funds only protected to £85k? I thought pensions had more protection.

Tammer

Hi,

If your pension provider is an insurance company (there are fewer of them now than there used to be) then you have unlimited protection for your pension funds. For your non-insured SIPP investments these would have protection up to either £50k or £85k (it is very confusing trying to work out which) so splitting them might be a reasonable idea if you have a few years to go until retirement.

Albermarle

I understood that the SIPP platform itself also had £85K cover, separately from the funds ? although it is a confusing area for sure.
In case for example you sent them money and instructed them to invest in Fund X, and they ran off to the Bahamas with it instead .

On the other hand if you stick with the well known names then the chances of something going wrong like that is close to zero .

tacpot12

I considered splitting my SIPP funds between two providers, but in the end decided that the overhead would be too great, and my portfolio too small to warrant it. If my portfolio was above £600K, I would split it and put c £300K with each provider, for safety.

Audaxer

papercontracts wrote: »

Thanks for your reply. But are the funds only protected to £85k? I thought pensions had more protection.

There is a risk if there is a major fraud in the fund house, but it is said to be a very minimal risk, especially with a large fund house like Vanguard.

If all your investments were in the one platform or fund house, there could be a delay in getting access to your funds if something did happen like a major fraud. So if you have a large pension fund of several hundred thousand, I might be tempted to spilt it between a couple of providers and/or fund houses.

Brynsam

Why do you have 3 separate SIPPs in the first place - and what has changed to make you decide you might prefer just one?

papercontracts

Three providers just for historical reasons, and thinking of moving to just one because it's the cheapest and can hold the funds I want to invest in.

SonOf

hanks for your reply. But are the funds only protected to £85k? I thought pensions had more protection.

Pension funds (also known as insured funds) have more protection. 100% of the value with no upper limit. However, a SIPP is not an insured contract and doesn't use insured funds (caveat that a couple of intermediary providers do offer insured funds on their SIPP). In your case, you want to use Vanguard funds and they do not offer any insured funds in the UK. If you use Vanguard ETFs, you get no FSCS protection. If you use Vanguard OIEC then you get £85k per fund house.

papercontracts

Sorry if I'm not getting this - and I appreciate your answers. I understand that the value of my units in the Vanguard tracker fund can go up and down. But I suppose I'm concerned about the risk of the platform provider (Interactive Investor) going bust, or Vanguard going bust (or fraud at either of them). Is there no protection against that?
Thanks.