Is it safer to split pension funds between providers?

MK62

If your SIPPs are your only source of income, then it might be prudent to have that split across two platforms........the risk may be small, but in the event of a platform failure, even if you are fully covered against loss, that cover probably wouldn't kick in instantly, so you may be without income for a period while it's all sorted out....

Of course, if you have a cash buffer, or an alternative income source, such as an ISA on a different platform, then splitting a SIPP might be a bit overkill and an unnecessary extra cost.

Audaxer

papercontracts wrote: »

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.

There is FSCS protection of up to £85k if you lose money through a major fraud at either a fund house or platform. I was concerned about that as well, but advised on here by experienced investors that at major platforms and fund houses the risk is so minimal that it is not worth worrying about. Your investments in the platforms are ring-fenced so even if the platform goes bust, your funds shouldn't be affected, although there could be a delay in getting access to them if the platform is being taken over by another platform.

At major fund houses I am advised it would have to be a really major fraud which would be very unlikely to happen, and if it did, then at worse investors may lose a small percentage of their investments.

If you had say £1m in SIPPs it would be unrealistic to have it split between 10 or more platforms, but some people would feel safer not having all their eggs in one basket, and therefore with that amount may split it between 2 or 3 platforms.

SonOf

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?

If you use Vanguard ETFs then you get no FSCS protection on the fund
If you use Vanguard OIECs then you get £85k protection per fund house

Your money is ringfenced from the SIPP provider. So, if a SIPP provider goes under, your assets are not their assets. Delay in trades is the main issue that you would likely suffer. Assuming that another provider doesn't come in and buy them up cheaply. However, the SIPP provider has £85k FSCS protection covering issues related to them.

Pension funds, as mentioned, have 100% FSCS protection (although some caveats there with external funds as they are untested with the FSCS and providers are generally unsure whether you would get 100% protection with them).