Safety of funds held on pension and investment platforms

[9xxNick]

Is there any reason to believe that pension funds held through an investment platform such as Aviva or Vanguard would be at risk in the event that the platform provider fails for any reason?

Does that risk depend in any way on whether the money is invested in funds operated by the platform or by another provider?

Fund value would be in excess of that covered by the FSCS.

[Jawls]

9xxNick said:

Is there any reason to believe that pension funds held through an investment platform such as Aviva or Vanguard would be at risk in the event that the platform provider fails for any reason?

Does that risk depend in any way on whether the money is invested in funds operated by the platform or by another provider?

Fund value would be in excess of that covered by the FSCS.

Client funds are segregated from the platform provider’s balance sheet. Unless there’s been unbelievable levels of corruption, your money would be safe.

It might take a while for your assets to be transferred to some other provider, so short term access could be a pain, but your assets would be safe.

[9xxNick]

Thanks - appreciated.

[Abdul Abulbul Amir]

I was wondering this as most my pensions are with Aegon. Great for seeing them all on one platform but I did worry about the risk.

[hopeydaze]

Surely the biggest risk is someone hacking into your account and steals by the money, not the platform provider failing

[hopeydaze]

Surely the biggest risk is someone hacking into your account and steals by the money, not the platform provider failing

[Panamax]

NowWatchThisDrive said:

split approx 65:20:15

Bizarre split. Why? Doesn't look like effective spread of risk.

Or is it as simple as one provider for each type of account, to suppress admin'?

[DoubleSix]

I would be far more concerned about individual fund risk and fund house/manager risk.

[Zigster]

Panamax said:

NowWatchThisDrive said:

split approx 65:20:15

Bizarre split. Why? Doesn't look like effective spread of risk.

Or is it as simple as one provider for each type of account, to suppress admin'?

Presumably simply due to contribution limits? Shouldn’t affect the spread of risk in itself as these are just “wrappers” not the underlying investments.

Say high 7 figures means £7m, this would mean just over a million in a SIPP (with the LTA £1.073m), about £1.5m in ISAs (which is a lot of years of £20k contributions and some investment growth), so the excess kind of defaults to a GIA unless your investing in something a bit more exotic.

[Edinburger]

Platforms follow the FCA's Client Asset rules (CASS) and have controls as well as independent audits to ensure your assets are completely seperated from the platform's assets and are ring-fenced in a seperate nominee name.

If your investments are with fund houses, unit trusts, OEICs, investment trusts, ETFs, etc., (rather than insured or mirror funds) then the FSCS covers each one up to £85K, in the unlikely scenario of a provider going bust.

[9xxNick]

Thanks for the helpful responses, which are appreciated.

[JapanRed]

NowWatchThisDrive said:

In theory, client asset segregation rules mean you shouldn't have too much to worry about and you'd expect to be made whole eventually. In practice, no regulation or oversight is perfect, and there have been a few high profile, messy failures in this domain over the years. Some of the pertinent factors you might consider:
- the platform(s): size (too big to fail?); ease of scrutiny (publicly listed?); reputation (are they well-established? profitable?); activities (do they offer leverage?)
- the proportion of your assets involved and extent of personal catastrophe ensuing from any loss
- your idiosyncratic level of paranoia

Personally...I have a high seven figure equity portfolio encompassing GIAs, ISAs and SIPPs, split approx 65:20:15 across three household name platforms. So even the smallest is many multiples of the FSCS limit, and that's just something I have to be ok with. There's not enough platforms I'd trust to enable me to optimally split everything, and the administrative burden of doing so would be significant anyway.

Have you got any jobs going?

[Cheib]

NowWatchThisDrive said:

I
- the platform(s): size (too big to fail?); ease of scrutiny (publicly listed?); reputation (are they well-established? profitable?); activities (do they offer leverage?)

Those are all metrics worth considering and I would certainly focus on profitable, a lot of the smaller platforms aren’t and some of the big one’s owned by insurance companies or asset managers aren’t profitable in their own right either.

FSCS will cover individual funds if it is a UK based Asset Manager, won’t cover ETF’s if they are domiciled in another jurisdiction (lots are). Cash is covered by FSCS separately and is placed on deposit with a bank effectively on your behalf by the platform… I know in the case of the platform I use (Transact) they use a panel of banks which in their case were the big four clearing banks. I think that meant the FSCS limit for cash on the platform was effectively 4X£85k. Although it’s a while since I looked at the latter in detail,w as more of a focus in 2008 !

I use Transact because they are listed, they are profitable (long history of), highly rated by IFA’s (so good admin), they have a very healthy cash position significantly n excess of their capital requirements and have never had any debt.

[Edinburger]

Cheib said:

NowWatchThisDrive said:

I
- the platform(s): size (too big to fail?); ease of scrutiny (publicly listed?); reputation (are they well-established? profitable?); activities (do they offer leverage?)

Those are all metrics worth considering and I would certainly focus on profitable, a lot of the smaller platforms aren’t and some of the big one’s owned by insurance companies or asset managers aren’t profitable in their own right either.

FSCS will cover individual funds if it is a UK based Asset Manager, won’t cover ETF’s if they are domiciled in another jurisdiction (lots are). Cash is covered by FSCS separately and is placed on deposit with a bank effectively on your behalf by the platform… I know in the case of the platform I use (Transact) they use a panel of banks which in their case were the big four clearing banks. I think that meant the FSCS limit for cash on the platform was effectively 4X£85k. Although it’s a while since I looked at the latter in detail,w as more of a focus in 2008 !

I use Transact because they are listed, they are profitable (long history of), highly rated by IFA’s (so good admin), they have a very healthy cash position significantly n excess of their capital requirements and have never had any debt.

I wouldn't worry too much about this. If you use an IFA, they'll do due diligence on platforms. If you invest yourself, there's plenty data available on platform strength, profitability, ownership, etc.

[Cheib]

Edinburger said:

I wouldn't worry too much about this. If you use an IFA, they'll do due diligence on platforms. If you invest yourself, there's plenty data available on platform strength, profitability, ownership, etc.

I think that very much depends on the sophistication of the IFA. Clearly they’re supposed to do it but there are plenty of expamples in the financial markets where that kind fo due diligence doesn’t happen. Woodford being a recent one.