Half of consumers do not think FSCS protection applies to pensions
Consumers are more likely to opt for those providers which prominently promote available protection.
The Financial Services Compensation Scheme (FSCS) has today published research findings into consumer awareness of the protection available for different financial products.
The research, undertaken by Populus, found that just under half (49%) of respondents do not think FSCS protection applies to pension products. Of those surveyed who have a pension, fewer than one in twenty (4%) were aware that the FSCS protects 100% of a pension directly managed under a life insurance contract(1).
There is also low consumer awareness of what protection is available if someone decides to withdraw their pension fund and put it into another product. Only 5% are aware that protection of up to £50,000(2) is available for any pension funds transferred into an investment product, and only 5% are aware of the unlimited protection limit that applies to an annuity.
Despite current low levels of awareness, more than three quarters (78%) of consumers said that they would have "a higher opinion" of pension providers that prominently communicate the available FSCS protection, with the same proportion (78%) also saying they would be "more likely" to opt for a pension provider that prominently promotes FSCS protection over one that does not. At present, only 43% of people with a pension are confident that it is safe if the provider goes out of business.
To improve consumer awareness of FSCS protection, and to ensure they are choosing the most appropriate financial product for them, the FSCS is supporting a working group for the industry to come together and identify a best practice standard for pensions disclosure.
Mark Neale, FSCS Chief Executive, said: "Most pension products are fully protected by FSCS – so it is concerning that so few know about this. Pensions are a safe, reliable investment to provide income for retirement. It is therefore essential that the public has confidence that their pension is protected.
"In March 2018 we launched a group, representing leading firms in the advisory and wider life and pensions sectors, which is working together to look at developing an industry best practice standard for disclosure. This group will offer a benchmark on how life and pension product providers convey information about FSCS to consumers. The Populus research shows that such work is needed to improve awareness".
(1)This includes personal pensions and stakeholder pensions, but not defined benefit workplace pension schemes.
(2)The compensation limit for investment claims will increase to £85,000 for all claims in relation to defaults on or after 1 April 2019.
For more information call Max Kelly at Hanover Communications on 07590 120533 or firstname.lastname@example.org.
Notes to editors
1. About FSCS
FSCS is the UK's statutory compensation scheme for customers of authorised financial services firms. FSCS is funded by the financial services industry and protects investment business, deposits, home finance – mortgage – advice, and general insurance and insurance broking. FSCS can pay for financial loss if a firm cannot pay claims against it. We are independent, and do not charge individual customers for using our service.
Before FSCS can declare a bank, building society or credit union in default and pay compensation to its customers, it must be satisfied the firm cannot repay deposits because of its financial circumstances, and has no current prospect of being able to do so. For more information on FSCS, please visit www.fscs.org.uk.
2. About the Populus research
The findings are from a survey of 2,067 UK adults carried out by Populus between 25-28 May 2018.