Personal pensions and annuities are often thought of as investment products. In reality, they are usually long-term insurance contracts. That means, were the firm providing the annuity to fail, the FSCS limit for long-term insurance would apply, providing protection to 100% of the claim, with no upper limit. Most types of claimants are eligible to make such claims in respect of long-term insurance contracts, but whether protection applies can also be affected by where claimants were living when they took out the product.
However, if the claim involves mis-selling of long-term insurance then FSCS deals with it as investment advice. For example, if someone receives bad advice to transfer their retirement to a FSCS-protected personal pension, then FSCS protects the claim up to £50,000.
Self-Invested Personal Pensions (SIPPs) are a type of ‘wrapper’ for a bundle of different financial products. These products can include insurance, investments or deposits. SIPPs can be provided directly by a SIPP manager or by fund managers, banks, building societies or insurance companies. If the provider of an underlying product held within the SIPP fails, the FSCS compensation limit depends on the type of product held within the SIPP.