Pension savings protection

HMTrott

Hi, 
I would be grateful for some advice on how best to ensure investment and savings are safe! Is it best to have a few pension saving plans with different companies so if a company suffered financial problems  my money is at lest risk. E.g. if I have a SIPP with fidelity, invested in a range of funds and a total value of 200K, if fidelity ran into problems would my money be safe (if it is in different funds such as fidelity funds, AXA funds etc)? Would it be better to have, for example 100K with fidelity and 100K with another platform such as Hagreaves Lansdown or vanguard. Similarly, if I have 100K on a fidelity platform with Vanguard and Vanguard became insolvent, would my money be protected? 
I would appreciate responses to this as I am keen to minimise risk!
Many thanks

dunstonh

 Is it best to have a few pension saving plans with different companies so if a company suffered financial problems  my money is at lest risk. E.g. if I have a SIPP with fidelity, invested in a range of funds and a total value of 200K, if fidelity ran into problems would my money be safe (if it is in different funds such as fidelity funds, AXA funds etc)? 

Fidelity is just the administrator.  Your funds are ringfenced.   If you stick to mainstream companies and are using mainstream unit linked funds, then there should never be an issue.   There are theoretical issues potentially but as long as you stick to mainstream you shouldn't have a problem.   Its not like the banks and savings accounts.

Would it be better to have, for example 100K with fidelity and 100K with another platform such as Hagreaves Lansdown or vanguard.

If you are only talking £200k then no.

If you are really paranoid then sticking the whole lot with an insurer and using insured funds would be the "safest" option in terms of FSCS protection.  But it would be unnecessary.  People have millions of pounds on the same platform.  You reduce risks by diversifying the fund houses you use.  

Technically, using Vanguard as the administrator and Vanguard funds increases risks.  Not reduce it.  However, the risk is so minimal that nobody worries about it.   If you were to pick a minor platform that has never been profitable and were using weird or unusual investments, then that is where the problems are more likely to be.

Albermarle

I think if Vanguard or Fidelity went bust then probably WW3 just happened , so your pension would be the least of your concerns.

gm0

Total loss is extremely unlikely due to asset ring fencing.  But loss of access for a period maybe months - in the case of a platform failure (smaller, fast growing, data issues goes under) is far from impossible while it gets sorted out.  IT catastrophes affect the big and the small sometimes.  You can choose how to "buffer" that possibility. Cash on hand, 2nd platform used at a price are both valid options.

There is also the mostly but not entirely theoretical and largely legally untested advantage of the "100% protected" insured version over the 85k limit protected SIPP.  If you could hold the same assets insured at the same price as uninsured then why would you not do so.  Usually you can't.  Eccentrically I have looked into this a fair bit seeking clarity and finding little (via pension scheme and via House of Commons briefing documents on pensions reform). 

And the platforms with insured fund collections (life company typically) are often bundled in schemes with limited choice.  But if the price is right and the assets are what you want then it's another defendable choice.  I will likely end up with half in a life company master trust and half in a mainstream retail SIPP.  All the choice I need. Platform access hedged.  Basic online functionality vs newer outfits.  At some added overall platform cost. Half has insured fund protection. Half doesn't.  For a single company failure - half my funds should remain accessible throughout and due to ring fencing all *should* reappear eventually.  It's a minority view I think.  Many go with a single platform on cost and simplicity.

Albermarle

gm0 said:

Total loss is extremely unlikely due to asset ring fencing.  But loss of access for a period maybe months - in the case of a platform failure (smaller, fast growing, data issues goes under) is far from impossible while it gets sorted out.  IT catastrophes affect the big and the small sometimes.  You can choose how to "buffer" that possibility. Cash on hand, 2nd platform used at a price are both valid options.

There is also the mostly but not entirely theoretical and largely legally untested advantage of the "100% protected" insured version over the 85k limit protected SIPP.  If you could hold the same assets insured at the same price as uninsured then why would you not do so.  Usually you can't.  Eccentrically I have looked into this a fair bit seeking clarity and finding little (via pension scheme and via House of Commons briefing documents on pensions reform). 

And the platforms with insured fund collections (life company typically) are often bundled in schemes with limited choice.  But if the price is right and the assets are what you want then it's another defendable choice.  I will likely end up with half in a life company master trust and half in a mainstream retail SIPP.  All the choice I need. Platform access hedged.  Basic online functionality vs newer outfits.  At some added overall platform cost. Half has insured fund protection. Half doesn't.  For a single company failure - half my funds should remain accessible throughout and due to ring fencing all *should* reappear eventually.  It's a minority view I think.  Many go with a single platform on cost and simplicity.

I have a similar strategy .
Current workplace pension with traditional life company/insured funds . Reasonable choice and low costs ( large employer ) . Multi asset fund + platform costs 0.27% all in. Overall average fee 0.4% . Drawdown free .
Ex workplace pension with traditional life company/insured funds  - Middle cost . Most funds 1 % with 0.5% discount , one a bit more. Would need to transfer to drawdown , either internally or externally.
SIPP ( born from other ex employer pensions transferred in ) - More choice and quicker , easier to use website . However due to variety of funds/IT's/ETF's very variable charges from 0.1% to 1.2% .
Will use SIPP when I go into drawdown and probably transfer in the middle cost insured funds when needed .

BuildTheWall

I don’t know why people find it difficult to understand- your money is with the fund house, not the platform. 

As gm0 says, a platform may become unavailable for a short while due to hacking or system’s failure- like what’s happened with Robinhood recently. But as long as you don’t keep lots of cash in your investment account, you’ll be fine. 

tacpot12

BuildTheWall said:

I don’t know why people find it difficult to understand- your money is with the fund house, not the platform. 

As gm0 says, a platform may become unavailable for a short while due to hacking or system’s failure- like what’s happened with Robinhood recently. But as long as you don’t keep lots of cash in your investment account, you’ll be fine. 

And even though it is with the fund house, it is kept ring-fenced so that it is never owned by the fund house. You remain the beneficial owner at all times. The FCA implement strict rules in their Client Assets Sourcebook for how Client assets are managed, and large firms such as Fidelity and Vanguard have to make monthly returns to show that they are complying with the rules. In the UK, we have some of the best financial regulation in the world. This doesn't mean that problems can't occur, or that your money is completely safe, but it is very, very safe if you invest with a large provider.  

I think the reason that people find it difficult to understand is that the fund houses don't really promote this aspect. I'm guessing the FCA wants them to emphasise that your capital is at risk when investing (due to market movements), and don't want this diluted by reassurances that arise out of the CASS regime.  

Albermarle

BuildTheWall said:

I don’t know why people find it difficult to understand- your money is with the fund house, not the platform. 

As gm0 says, a platform may become unavailable for a short while due to hacking or system’s failure- like what’s happened with Robinhood recently. But as long as you don’t keep lots of cash in your investment account, you’ll be fine. 

Even personal cash on a platform is covered by the usual bank £85K FCSC cover and most platforms use more than one bank I think.