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Is pension safe in a SIPP

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Grandhisworld
Grandhisworld Posts: 2 Newbie
in Auto-enrolment
Am I correct that annuities are protected by FCA with no upper limit but a SIPP only has £50k protection. If you have £500k pot should you split it ten ways to be safe?

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  • Linton
    Linton Posts: 17,171 Forumite
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    No. With bank deposits "your" money is actually owned by the bank. All you have is a promise by the bank that they will return it on request. So if a bank goes bust your money is at risk - it can be used to pay the bank's debts. With a SIPP, the SIPP provider and fund managers dont own your money, they merely have the right to manage it in accordance with their remit. So if one of them goes bust your SIPP can carry on under someone else's management. Your money cannot be used to pay the manager's debts.

    So the £50K protection would only come into play in very unusual circumstances, the only ones I can think of are fraud or extreme negligence. If you use mainstream regulated providers the chances of this happening I believe can be discounted. Many people have many £100Ks in their portfolios.

    Not really linked to FSCS protection but there is one factor that may lead you to use more than one provider. Were the provider to go bust or have severe IT problems your access to the money could be difficult for some time whilst things were sorted out. So it may be prudent to use say 2.
  • Linton
    Linton Posts: 17,171 Forumite
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    PS one situation where protection could be relevent is if you held a very large amount in cash. This would be deposited by the provider into a bank.
  • dunstonh
    dunstonh Posts: 116,376 Forumite
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    Personal pensions and stakeholder pensions get 100% FSCS protection with no upper limit. SIPPs only get £50k FSCS protection. However, the underlying investments within the SIPP get their own £50k FSCS protection providing they are investments that qualify for FSCS protection (i.e. shares, investment trusts and ETFs dont but unit trusts, OEICs do).

    This question would have been better placed into the main pension section where most people would view it and not misposted into the auto-enrolment section which is off-topic for this question as well as the section having little traffic.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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