Pension Protection Limits

k6chris · 10 October 2017 at 7:32AM

Having just watched "The Great Short" my mind turned to the level of protection available in case of failure of a product / business, rather than that of underlying valuations falling. A quick search found this;

https://www.fscs.org.uk/what-we-cover/compensation-limits/ which says for investments "The maximum level of compensation for claims against firms declared in default on or after 1 January 2010 is £50,000 per person per firm."

I want to try and clarify what they mean by 'Firm'? Here are a couple of scenarios, lets assume a ficticious case where I have £250,000 in a SIPP with (Say) H&L, it contains funds from Vanguard, HSBC, L&G and Black Rok, plus £100,000 in cash waiting to be invested

1) If H&L go bust, is my limit of protection £50,000 or are the underlying funds still in my name and so protected?

2) Is the £100,000 in cash (inside the SIPP) still protected as it held in a client account?

3) What happens if one of the fund issuers goes under, is that £50,000 per 'firm' too or are they outside FSCS protection?

Many thanks - I will watch Bambi next week instead :rotfl:

zagfles · 10 October 2017 at 7:41AM

DIscussed here loads, search the archives. Basically money and investments are held by both platforms and fund managers in ring-fenced client accounts so if either went bust their creditors would have no access to your funds.

Audaxer · 10 October 2017 at 8:41AM

You are protected up to £50k under FSCS for each fund house you are invested with in the event of a major fraud and your funds are lost. You also have this same protection if the platform is subject to a major fraud. So although your funds would be ring-fenced there is a small possibility that your funds could be at risk in the event of a major fraud in either the fund houses or platform you choose to invest in.

michaels · 10 October 2017 at 9:48AM

Audaxer wrote: »

You are protected up to £50k under FSCS for each fund house you are invested with in the event of a major fraud and your funds are lost. You also have this same protection if the platform is subject to a major fraud. So although your funds would be ring-fenced there is a small possibility that your funds could be at risk in the event of a major fraud in either the fund houses or platform you choose to invest in.

Does this also include hacking - say your platform is hacked and funds are transferred out and stolen and the platform goes under because it can not afford to make good the losses presumably this 50k is all the compensation you would get.

Do people split funds across providers/platforms to protect themselves against this? Is this even possible if you have a company administered DC scheme?

dunstonh · 10 October 2017 at 9:59AM

stakeholder pensions and personal pensions using internal insured funds get 100% FSCS protection with no upper limit.

If FSCS protection is a a concern of yours then maybe using insured funds is the better option. Or at least go no more than £50k per fund house and stick to UT/OEICs and not ETFs/ITs

Pension Protection Limits

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