Stakeholder [et al] pensions financial protection - capped?

Milarky

If you make a valid claim for a plan which we have arranged for
you and we are unable to meet our liabilities in full, you may be
entitled to compensation from the Financial Services
Compensation Scheme. The maximum level of compensation
you can receive from the scheme for an investment business
claim is £48,000 (100% of the first £30,000 and 90% of the next
£20,000) for each person.

[Taken from the 'key features' document for a CIS Limited Stakeholder Pension]

So does this mean that there a capped level of protection [like that covering savings held with banks etc] of £48,000 per £50,000 held?

Unlikely as it is that Stakeholder [and similar] pension providers would 'lose' the money [its in your own name, after all] and so not be able to trade, is the existence of a 'cap' [if that's what this is] a warning that one should not have all one's pension savings with a single provider, but spread around if they are significant in relation to the level of single-policy protection?

[It's also the case that differential charging now exists with policies - ie. Stakeholder plans taken out before 1st April 2005 are slightly 'cheaper' than those taken out since then -up to 0.5% per year for the first tens years of any plan. If the advice would have been to hold several Stakeholder policies anyway, it would have been a good idea to have opened additonal plans in anticipation of this higher charge. Too late now, of course!]

crossleydd42

I don't know where you get the £50,000 from, unless you hold more than one plan, each one being for £50,000. I read it that the limit is £48,000 per plan, regardless of the amount in the plan.

DavidLaGuardia

For Deposit Accounts:
Under the Scheme, payments are limited to a maximum of £31,700, that is 100% of the first £2,000 and/or and 90% of the next £33,000. The payment is calculated by reference to all the investor's protected shares (in the sense of buidling society shares) with, and/or deposits in, the company. Therefore, for example, if a claimant had two separate accounts with a company, one containing £2,000 and the other £1,500, he or she would receive £3,350 (100% of the first £2,000 and 90% of the next £1,500).

So yes there is less risk in having money spread with different people, but given that there are often incentives on larger investments it might be not such a good idea to sacrifice such a "bird in the hand" with protection to solely protect against an event that is unlikely to happen, yet it may still be a good idea simply to diversify funds as one cannot determine which will achieve the best results in the future.

And..not all stakeholders have increased to the new cap

EdInvestor

Hi Milarky

Milarky wrote:

So does this mean that there a capped level of protection [like that covering savings held with banks etc] of £48,000 per £50,000 held?

This is a bit puzzling. I was under the impression there was a 48k cap applied to "investment business" eg unit trusts, stockbrokers, fund managers and the like, but that the compensation limit on pensions or other life business was 90% of the total amount ( no limit on the amount) .

Mind you the statement says 48k per 50k held.Does that mean 96k would be paid out of 100k was held, ie 96% of the total?

Suggest you ring them up to clarify.

Milarky

Sorry if I phrased that inelegantly by "£48,000 per £50,000 held" I was using a shorthand to mean: "£48,000 per £50,000 held per investor per company". I would assume that this works just like cash deposit protection - which limits the protection to the same amounts regardless of the numbers of separate accounts being held. I did not mean to suggest, therefore, that you could double your protection simply by having two different policies through the same provider.