FSCS’s protection for retirement savings


1. What level of protection applies if I deposit my pension funds in a bank or building society and it fails?

Should you deposit your pension pot in a bank or building society account, this will be classed as a deposit, which is protected up to £85,000 per person (and £170,000 for joint accounts).  

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2. What level of protection applies if I am already drawing a regular income from my pension via an annuity, and my provider then fails?

FSCS will pay 100% of the retirement income you are drawing down from that product as a benefit falling due.

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3. What level of protection applies if I am still building up my pension pot or have investment life savings?

FSCS will protect 100% of your pension pot with a life insurer or 100% of any investment life savings you hold, such as endowment policies or investment bonds.

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4. What level of protection applies if I invest my pension fund?

When it comes to investment products, the level of protection is £50,000 per person per authorised firm. So if you lost money because an authorised firm gave you bad or misleading advice, negligently managed your investments, or an adviser committed fraud in relation to your pension plan, then you would only be covered for up to £50,000 if the firm fails.  

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5. What compensation limits apply to Self-Invested Personal Pensions (SIPPs)?

FSCS may be able to consider a claim about SIPPs advice under the FSCS’ investment limit which is £50,000, per person, per failed firm.

Once a SIPP has been set up, a consumer may decide to hold a variety of products including investments, deposits or insurance within the SIPP. These may be held directly with the SIPP providers or with separate providers such as a fund manager, deposit taker (bank or building society), or insurance company.

If a claim arises due to the failure of one of the underlying products held within the SIPP, FSCS may be able to help as long as the underlying product provider is authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA). The limits of protection depend on the type of product held.

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6. What compensation limits apply to a defined benefit pension scheme?

If you are in a defined benefit pension scheme, also referred to as a final salary scheme, then you will be covered under the Pension Protection Fund. For more details, please visit www.pensionprotectionfund.org.uk 

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7. What compensation limits apply in relation to claims arising from accidents to the policyholder?

Claims under Pure protection policies are protected to 100% of the claim. 

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8. Are the government’s new pensioner bonds covered by FSCS?

No, however the new pension bonds are operated by National Savings & Investments (NS&I) which is backed by the Treasury. 

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9. What is the process should a life insurer fail?

If a life insurer failed, the FSCS would initially work with the insolvency practitioner to try to arrange continuity of cover for policyholders either by transferring the business (or part) to another life insurer or by the issue of substitute policies by another life insurer (at least up to the level of 100% of the benefits under the contract immediately prior to the insolvency).  However, if this could not be done, FSCS would instead pay compensation to policyholders with eligible claims calculated at 100% of the claim, with no upper limit.

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10. What is the protection for occupational pension schemes?

In the case of an occupational pension scheme providing money purchase benefits, the rules require FSCS to look through the trustees of the scheme to the individual members and treat the members as the claimants. So, if the trustees had invested in an investment product (and the conditions set out above were met) FSCS could pay each member up to £50,000. Where the money purchase scheme is invested in a life insurance contract, FSCS would first try to secure continuity of cover. If this was not possible FSCS would instead pay compensation calculated at 100% of the claim under the life insurance contract with no upper limit. 

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