Are Defined Contribution pensions protected?
Discussion
Hi all,
Curiosity caused me to Google this and I've still not really found a clear answer, so turning to the collective wisdom of PH!
Are DC workplace pensions, above the £85k FSCS limit, protected in the uk if the provider were to go bust?
I'm early forties so a while from retirement and pay into a workplace DC pension. That's now quite a bit over the FSCS value.
I can see that there is government pension protection in place for company pension schemes for DB holders; but hard to see what, if anything, exists for DC holders.
I have a few old pensions with different institutions seperate to my now main employer pension scheme.
Would I be sensible to top up the old ones to 85k each as well ? Or am I overly about nothing?
Many thanks!
Curiosity caused me to Google this and I've still not really found a clear answer, so turning to the collective wisdom of PH!
Are DC workplace pensions, above the £85k FSCS limit, protected in the uk if the provider were to go bust?
I'm early forties so a while from retirement and pay into a workplace DC pension. That's now quite a bit over the FSCS value.
I can see that there is government pension protection in place for company pension schemes for DB holders; but hard to see what, if anything, exists for DC holders.
I have a few old pensions with different institutions seperate to my now main employer pension scheme.
Would I be sensible to top up the old ones to 85k each as well ? Or am I overly about nothing?
Many thanks!
You can have multiple SIPPs and you can use multiple fund providers.
I don't work in the industry so take this as just an uninformed opinion but if you stick to the mainstream fund houses so the Vanguards the Blackrocks and HSBCs and others and there's hopefully a very unlikely chance of this kind of thing being an issue.
Park it all in a fund backed by a tiny fund provider nobody has heard of and that risk increases IMHO.
I don't work in the industry so take this as just an uninformed opinion but if you stick to the mainstream fund houses so the Vanguards the Blackrocks and HSBCs and others and there's hopefully a very unlikely chance of this kind of thing being an issue.
Park it all in a fund backed by a tiny fund provider nobody has heard of and that risk increases IMHO.
DanL said:
worsy said:
Quite sobering. Choose your SIPP operator wisely.
Eh? What am I missing? fcs website said:
After 1 April 2019
If your pension provider fails
100% of your claim, with no upper limit.
Is this not fully protecting the pension?If your pension provider fails
100% of your claim, with no upper limit.
Up to £85,000 per eligible person, per firm.”
eliot said:
DanL said:
worsy said:
Quite sobering. Choose your SIPP operator wisely.
Eh? What am I missing? fcs website said:
After 1 April 2019
If your pension provider fails
100% of your claim, with no upper limit.
Is this not fully protecting the pension?If your pension provider fails
100% of your claim, with no upper limit.
Up to £85,000 per eligible person, per firm.”
How unexpected - struggling to understand how this is reasonable, and if a provider collapses then it’s going to be a huge problem.
Your pension investment is protected as it sits outside the company’s assets.
“ If you have more than £85,000 in your SIPP, you still shouldn’t need to worry if your SIPP provider goes bust. SIPP providers are not legally allowed to use client funds to pay their creditors or debts, and investor money is reign-fenced in separate holding accounts”
The case of Intelligent Money (ex forum sponsors) recently who went into administration. Nobody lost any money and their SIPPs were transferred to a new provider.
No need to worry.
“ If you have more than £85,000 in your SIPP, you still shouldn’t need to worry if your SIPP provider goes bust. SIPP providers are not legally allowed to use client funds to pay their creditors or debts, and investor money is reign-fenced in separate holding accounts”
The case of Intelligent Money (ex forum sponsors) recently who went into administration. Nobody lost any money and their SIPPs were transferred to a new provider.
No need to worry.
A 'pension' in FSCS terms is an annuity or final salary type pension where you receive an 'income'. Those schemes could run out of money if their underlying investments fail to perform & that's where the 100% guarantee comes in. There is heavy regulation for those providers as 'pensions' are considered an insurance product, so the providers need to continually show there reserves and ability to withstand potential market events.
A SIPP, however, is considered an investment & is covered for £85k per person per institution. As above though, your investment is ring fenced from the companies own money, you own the underlying assets. This is different from a bank deposit where your money is used for other things. So in the case of a SIPP, the £85k should only ever be needed in the case of fraudulent activity by the provider, where your assets are no longer there - or as has been the case, you don't really know what the underlying assets are and the value of those assets has either been mis-reported to you, or they fall in value very quickly / become worthless.
IMHO, there's still an eggs & baskets rule, I wouldn't want 100% of my retirement assets in a single place once I'm drawing on them. Whilst there is cover, it could take a while (years) to resolve any issues, so having money elsewhere is sensible.
A SIPP, however, is considered an investment & is covered for £85k per person per institution. As above though, your investment is ring fenced from the companies own money, you own the underlying assets. This is different from a bank deposit where your money is used for other things. So in the case of a SIPP, the £85k should only ever be needed in the case of fraudulent activity by the provider, where your assets are no longer there - or as has been the case, you don't really know what the underlying assets are and the value of those assets has either been mis-reported to you, or they fall in value very quickly / become worthless.
IMHO, there's still an eggs & baskets rule, I wouldn't want 100% of my retirement assets in a single place once I'm drawing on them. Whilst there is cover, it could take a while (years) to resolve any issues, so having money elsewhere is sensible.
craig1912 said:
Your pension investment is protected as it sits outside the company’s assets.
“ If you have more than £85,000 in your SIPP, you still shouldn’t need to worry if your SIPP provider goes bust. SIPP providers are not legally allowed to use client funds to pay their creditors or debts, and investor money is reign-fenced in separate holding accounts”
The case of Intelligent Money (ex forum sponsors) recently who went into administration. Nobody lost any money and their SIPPs were transferred to a new provider.
No need to worry.
Craig1912 is right, but look at your scheme providers rules booklet for more detail. The big providers tend to be insurance backed so that if the operator goes bust, the investments remain and hence you get your pension“ If you have more than £85,000 in your SIPP, you still shouldn’t need to worry if your SIPP provider goes bust. SIPP providers are not legally allowed to use client funds to pay their creditors or debts, and investor money is reign-fenced in separate holding accounts”
The case of Intelligent Money (ex forum sponsors) recently who went into administration. Nobody lost any money and their SIPPs were transferred to a new provider.
No need to worry.
b
hstewie said:
hstewie said: You can have multiple SIPPs and you can use multiple fund providers.
I don't work in the industry so take this as just an uninformed opinion but if you stick to the mainstream fund houses so the Vanguards the Blackrocks and HSBCs and others and there's hopefully a very unlikely chance of this kind of thing being an issue.
Park it all in a fund backed by a tiny fund provider nobody has heard of and that risk increases IMHO.
Whilst diversity of funds is definitely a sensible approach, the funds are separate to the scheme.I don't work in the industry so take this as just an uninformed opinion but if you stick to the mainstream fund houses so the Vanguards the Blackrocks and HSBCs and others and there's hopefully a very unlikely chance of this kind of thing being an issue.
Park it all in a fund backed by a tiny fund provider nobody has heard of and that risk increases IMHO.
The pension scheme won’t protect an individual fund within your pension from going bust, eg Woodford, but depending on scheme rules should protect the overall pot if the scheme goes bust, eg aviva, lifesight, nest, etc.
Individual fund risk is managed through diversity of investment and sensible investment managers and high quality funds to mitigate this and prevent a single fund having a major impact on your overall pot
Yeah I was thinking more what happens if you invest with Bloggs IFA who puts your money in the Bloggs IFA SIPP and Bloggs IFA goes bust?
Your investment may be ring-fenced but I'm wondering if nobody steps in to take on Bloggs IFA it might be a struggle to get quick and uninterrupted access to it?
There was someone went under some years back, forget the name, and nobody stepped in and there was nobody to pick up the administrators fees so investors not only had to wait to get to their investments they also saw a chunk go to pay for the administrators costs.
Might not have been a pension but it opened my eyes to what is and isn't allowed.
Not trying to scare - but it does seem worth highlighting that you'd hope that should be safety and continuity with the massive names.
Your investment may be ring-fenced but I'm wondering if nobody steps in to take on Bloggs IFA it might be a struggle to get quick and uninterrupted access to it?
There was someone went under some years back, forget the name, and nobody stepped in and there was nobody to pick up the administrators fees so investors not only had to wait to get to their investments they also saw a chunk go to pay for the administrators costs.
Might not have been a pension but it opened my eyes to what is and isn't allowed.
Not trying to scare - but it does seem worth highlighting that you'd hope that should be safety and continuity with the massive names.
bhstewie said:
hstewie said: There was someone went under some years back, forget the name, and nobody stepped in and there was nobody to pick up the administrators fees so investors not only had to wait to get to their investments they also saw a chunk go to pay for the administrators costs.
Administrators costs can not be paid from investors funds. You are right that there may be delays in getting access to them though.I wouldn’t and haven’t put my retirement funds with a small provider. It sits with one of the biggest and with annual audits is safe.
craig1912 said:
Administrators costs can not be paid from investors funds. You are right that there may be delays in getting access to them though.
I wouldn’t and haven’t put my retirement funds with a small provider. It sits with one of the biggest and with annual audits is safe.
Thanks and I might have misunderstood the article I read and it doesn't help that I can't remember the name of the company.I wouldn’t and haven’t put my retirement funds with a small provider. It sits with one of the biggest and with annual audits is safe.
Might not have been a pension provider but I'm convinced I read that investors were told they might not get all their money back as there was nobody left to cover the administrators costs.
That'll bug me now
bhstewie said:
hstewie said: Thanks and I might have misunderstood the article I read and it doesn't help that I can't remember the name of the company.
Might not have been a pension provider but I'm convinced I read that investors were told they might not get all their money back as there was nobody left to cover the administrators costs.
That'll bug me now
Yes there have been a few occasions when investors have lost money but not from a SIPP provider going bust.Might not have been a pension provider but I'm convinced I read that investors were told they might not get all their money back as there was nobody left to cover the administrators costs.
That'll bug me now
It could happen through fraud or dodgy investments though.
It was Beaufort Securities.
Not a SIPP provider to be fair but it was bothering me
https://www.fca.org.uk/news/news-stories/informati...
Not a SIPP provider to be fair but it was bothering me
https://www.fca.org.uk/news/news-stories/informati...
Maybe thinking of this one?
https://citywire.com/new-model-adviser/news/the-ad...
As others have said, your underling assets are safe and are separate from the SIPP provider. But it could be a real PITA to get access to your funds if the SIPP provider isn’t operating properly.
So stick with the larger providers. My SIPP is with Fidelity: cheap and very unlikely to fail.
https://citywire.com/new-model-adviser/news/the-ad...
As others have said, your underling assets are safe and are separate from the SIPP provider. But it could be a real PITA to get access to your funds if the SIPP provider isn’t operating properly.
So stick with the larger providers. My SIPP is with Fidelity: cheap and very unlikely to fail.
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