DC scheme security

GenX0212

Not something I had really thought about until now.

I have three separate DC pots of approx £400k in an active Company work scheme, £50k in a deferred scheme with Aviva and £40k in a private pension with L&G, all different providers. The big pot is doing nicely in growth terms, the £50k has done ok in the past, the £40k isn't doing much at all really.

Now I know that having a little diversity across investments is a good way to spread risk but my actual question is about the financial security of the £400k active DC pot itself (as opposed to the financial performance. The scheme is run as part of a master trust administered by LifeSight (Towers Watson). I have read through all the information I can find but can't find anything any re guarantees, security of funds, FSCS protection etc. 

The Aviva and L&G pots will be covered by FSCS rules but what protection is the Company scheme likely to have? ; And should I really be worrying about it or not?

Brie

doesn't this get covered under the general thingme about stocks may go down as well as up?

p00hsticks

Brie said:

doesn't this get covered under the general thingme about stocks may go down as well as up?

OP's question isn't related to the financial performance of the stocks, but about their safety - i.e. if the pension company went bust or a rogue employee embezzled, how is the OP protected. 

Albermarle

Normally there is no real need for worry as your money is in investments within the pension. These are separate from the pension provider themselves. It is not the same issue as with banks and savings.

The big pot is doing nicely in growth terms, the £50k has done ok in the past, the £40k isn't doing much at all really.

The performance is all down to how the pension is invested. It is not connected to whether the pension provider is Aviva, Lifesight or L&G.

GenX0212

Albermarle said:

The performance is all down to how the pension is invested. It is not connected to whether the pension provider is Aviva, Lifesight or L&G.

Yes agreed 'the value of your investment can go down as well as up'. I was quoting who they were with as part of illustrating that they were covered by FSCS. Whereas with the larger pot even if FSCS protected it would only protect up to £85k in the event of the provider going bust.

I suppose what I am asking is; Is there any realistic risk in having one large pot vs several smaller pots which would each have FSCS protection in the event of failure.

Marcon

GenX0212 said:

Albermarle said:

The performance is all down to how the pension is invested. It is not connected to whether the pension provider is Aviva, Lifesight or L&G.

Yes agreed 'the value of your investment can go down as well as up'. I was quoting who they were with as part of illustrating that they were covered by FSCS. Whereas with the larger pot even if FSCS protected it would only protect up to £85k in the event of the provider going bust.

I suppose what I am asking is; Is there any realistic risk in having one large pot vs several smaller pots which would each have FSCS protection in the event of failure.

Long-term insurance contracts are normally covered for 100% FSCS protection with no upper limit. 

See https://www.fscs.org.uk/what-we-cover/pensions/  The top of the first page should give you the comfort you need!

Brie

GenX0212 said:

Yes agreed 'the value of your investment can go down as well as up'. I was quoting who they were with as part of illustrating that they were covered by FSCS. Whereas with the larger pot even if FSCS protected it would only protect up to £85k in the event of the provider going bust.

I suppose what I am asking is; Is there any realistic risk in having one large pot vs several smaller pots which would each have FSCS protection in the event of failure.

I didn't think that pension schemes were part of the £85k protected under FSCS.  Just bank accounts.  Which is why I said about things going down.  If the market truly bottomed out you could be left with very little.  But that's one reason to keep things in different pots.  You don't have to cash every single thing in at exactly the same time.  Start cashing in/collecting on one and then when the market recovers a bit start on the next one and so on.  

Assuming I haven't missed the point again!!

dunstonh

Yes agreed 'the value of your investment can go down as well as up'. I was quoting who they were with as part of illustrating that they were covered by FSCS

Which part of the FSCS are you referring to?  Deposits, Insurance or Investments?    all three can potentially be in play with pensions.

I suppose what I am asking is; Is there any realistic risk in having one large pot vs several smaller pots which would each have FSCS protection in the event of failure.

If they are not insured funds but on the investment side, then having the same fund in multiple platforms/providers does not increase your FSCS protection at fund level.    Its £85k per fund house.   If they are insured funds, that is covered by Marcon.   

GenX0212

Marcon said:

Long-term insurance contracts are normally covered for 100% FSCS protection with no upper limit. 

See https://www.fscs.org.uk/what-we-cover/pensions/  The top of the first page should give you the comfort you need!

Brie said:

I didn't think that pension schemes were part of the £85k protected under FSCS.  Just bank accounts. 

https://www.fscs.org.uk/check/pension-protection-checker/

"Answer - Defined contribution work pension schemes are structured in different ways, so you’ll need to check whether you’re FSCS protected or not.

Your defined contribution workplace pension could be set up to be trust-based, contract-based, or group-based. FSCS protection would depend on how your particular scheme was set up. It’s up to you to find out what protection your pension has."

So no clear answer from the FCSC website. I know the scheme is part of a master trust but as I said I haven't (as yet) been able to find out anything about protection guarantees.

Edit: and another part of the page says "We can’t protect Occupational Pension Schemes (OPS) if they fail. These may be protected by the Pension Protection Fund (PPF). "  whereas my understanding is the PPF only protects DB schemes.

Confused.com 🫤 

squirrelpie

Ask your pension scheme (administrators, trustees, provider, whatever)

Albermarle

Brie said:

GenX0212 said:

Yes agreed 'the value of your investment can go down as well as up'. I was quoting who they were with as part of illustrating that they were covered by FSCS. Whereas with the larger pot even if FSCS protected it would only protect up to £85k in the event of the provider going bust.

I suppose what I am asking is; Is there any realistic risk in having one large pot vs several smaller pots which would each have FSCS protection in the event of failure.

I didn't think that pension schemes were part of the £85k protected under FSCS.  Just bank accounts.  Which is why I said about things going down.  If the market truly bottomed out you could be left with very little.  But that's one reason to keep things in different pots.  You don't have to cash every single thing in at exactly the same time.  Start cashing in/collecting on one and then when the market recovers a bit start on the next one and so on.  

Assuming I haven't missed the point again!!

Investment platforms, pension providers etc are covered by FSCS compensation, in case of losses from fraud or maladministration, but of course you are not covered for investment losses.

However AFAIK, this FSCS cover has only had to come into play with what you might call dodgy or unregulated players.

It seems almost inconceivable that you would lose money to fraud or massive maladministration, if you are with a well known provider.