How safe is my pension?

michael1234

In the past, I have lost a substantial amount of money by several FCA authorised firms “going bust” due to fraud perpetrated by the directors of the company and their associates. All of them had lots of webpages about separation of client assets, what would happen should the firm go into administration etc etc and it all looked as safe as houses until it wasn’t.

So I’ve done a little research into my SIPP provider and I want to take just one example of what could go wrong. How do I know the ETFs and funds in my portfolio exist and are allocated to me? According to the FCA there are supposed to be lots of checks but as far as I’m concerned, the only checks worth anything are those conducted by a 3rd party not controlled by the same people owning my SIPP provider.

And I don’t think that is happening.

Moreover, AIUI, I’m only protected up to 85K by the FSCS.

So is my pension any safer than those other FCA authorised companies which took my money and when it all went wrong took years and years (over 5) to give me back a small percentage – quite a lot going on the Administrators.

Perhaps there are new rules or protections I'm not aware of ?

dunstonh

In the past, I have lost a substantial amount of money by several FCA authorised firms “going bust” due to fraud perpetrated by the directors of the company and their associates. 

I have to ask: what type of firms were you using, because you clearly were not in the mainstream?

So I’ve done a little research into my SIPP provider and I want to take just one example of what could go wrong. How do I know the ETFs and funds in my portfolio exist and are allocated to me?

Technically, they don't belong to you. That is the way pensions are set up.

Maybe it would help if you named the SIPP provider.

Also, ETFs do not have FSCS protection. Given your past history of multiple firms going bust after fraud, perhaps FSCS protection would be more important to you than the average consumer.

According to the FCA there are supposed to be lots of checks but as far as I’m concerned, the only checks worth anything are those conducted by a 3rd party not controlled by the same people owning my SIPP provider.

In the mainstream, there are plenty of checks, and on mainstream products and investments, there won't be any problems. If you go off the beaten track into the weird and unusual, then that is where you're more likely to find problems.

Moreover, AIUI, I’m only protected up to 85K by the FSCS.

The pension is only 85k, but the ETFs get zero FSCS protection.

Perhaps there are new rules or protections I'm not aware of ?

There have been no recent changes. If you're using UK-domiciled pension providers and UK-domiciled unit trust, OEIC, or pension funds, and you're buying investments and products that clearly state they are for retail investors then you should be fine.

Again, I think you need to give us some examples of what you are looking at.

michael1234

Much of my FCA authorised investments were in an ISA. Doesn't seem too off piste and certainly didn't at the time.

The "ownership" is central to my concern and your point about you not really owning them, crest etc etc is not really the point I'm making. Somewhere, it needs to be recorded that those Funds and ETFs are "mine". That is all done by the SIPP provider's trustee who is also controlled by the same people without any oversight as far as I can tell. That makes it risky. At least, substantially more risky than a pension should be.

FSCS protection is for the client account (e.g. cash held at the SIPP whilst transferring assets etc) . It does not cover and most sane people would not expect it to cover losses made by the underlying assets (ETFs, funds, even individual stocks).

So AIUI, the only additional protecetion I get is via the FSCS and I'm clinging on with the thought that the 85K protection comes with a lot more processes involving 3rd parties than what had happened at the firms I lost money with.

I'm probably ok naming the companies I lost money with but they are easily "Googleable". I don't see the point of naming my current SIPP as I suspect they are no more or less at any risk than anyone else. The point is its not a bank and I don't feel its as safe as a bank when it really should be.

dunstonh

Much of my FCA authorised investments were in an ISA. Doesn't seem too off piste and certainly didn't at the time.

The ISA may be the tax wrapper. However, the type of ISA and the underlying investments are the key issue. I think it's only one investment fund in the mainstream that has failed in the last 25 years. The rest of the failures have been niche and highly unusual.

FSCS protection is for the client account (e.g. cash held at the SIPP whilst transferring assets etc) . It does not cover and most sane people would not expect it to cover losses made by the underlying assets (ETFs, funds, even individual stocks).

FSCS protection also covers fraud on unit trusts and OEICs up to £85,000 per fund house. Pension funds get 100% FSCS protection with no upper limit. However, as that has never been tested, there is some confusion on whether it would just be internal funds or include external funds as well. Nobody's actually sure as external funds didn't exist when FSCS protection was introduced.

There is also further FSCS protection if the investments are put in place via an adviser.

I'm probably ok naming the companies I lost money with but they are easily "Googleable". I don't see the point of naming my current SIPP as I suspect they are no more or less at any risk than anyone else. The point is its not a bank and I don't feel its as safe as a bank when it really should be.

It is incorrect to assume that all SIPs are more or less the same. You have SIPP schemes that aren't really SIPP schemes but use the SIPP name in their marketing. You have platform SIPPs that allows pretty much any investment. You have platform SIPPs that only allow liquid investments. You have full SIPPs. And several others. Some SIP providers are unprofitable. Some have poor financials.

The point is its not a bank and I don't feel its as safe as a bank when it really should be.

Sticking to the mainstream, you shouldn't have a problem. If you go away from the mainstream, then you're increasing your risks.

Marcon

If you're that bothered, then transfer from the SIPP to a non-SIPP personal pension which qualifies as a long term contract of insurance and has 100% FSCS protection with no upper limit.

michael1234

I think that is good advice for anyone. The risks are not so vanishingly small that the owners might decide to play fast and loose. There is nothing to stop them doing that as far as I can see.

Having seen it time and time again (admittedly with not exactly mainstream but fully regulated FCA companies) I'm very surprised that pension provider companies don't have stronger checks in place.

jaybeetoo

It feels like we don’t have the full story here.

squirrelpie

A minor point but I think the FSCS limit is now £120,000 rather than £85,000.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82135435#Comment_82135435

That's purely for bank deposits. £85k still the limit for investment platforms.

Aretnap

With all due respect, if I was going to go to this much trouble and expense to transfer out of my company scheme, I'd probably think about whether I was happy with the protections around the alternative scheme first.

https://forums.moneysavingexpert.com/discussion/6556908/pension-advisor-would-want-21-000-for-a-failed-transfer/p1

artyboy

https://forums.moneysavingexpert.com/discussion/comment/82135421#Comment_82135421

I would certainly be very interested to know more of this story… it's unusual but not impossible to have have fallen victim to fraud by an FCA authorised firm. But the OP says that it happened to them several times.

I'm genuinely struggling to understand how this could have happened, even to the most unfortunate investor. Who are these companies I wonder…