Not All Pensions Have 100 Percent Protection

Not All Pensions Have 100 Percent Protection.

We have already covered this topic briefly on this website with regard to you as an investor being careful with the type of pension or investment scheme you have and the amount of protection you have from the Financial Services Compensation Scheme (FSCS) and the Pension Protection Fund.

Adding his weight to the argument, the chief executive of the FSCS, Mark Neale, has called for a revision of the compensation scheme to extend the level of protection to 100% of a saver’s pension savings pot.

By how much are your pensions and investments protected?

• Company Pension: Not Retired: 90% of the value your pension subject to a cap projected forward (today’s pension cap £36,401.19 pa which equates to £32,761.07 pa of pension protected in today’s money)
• Company Pension: Retired Early: 90% of the value your pension in payment subject to the £36,401.19 pa cap which equates to £32,761.07 pa pension protected
• Company Pension: Retired Normal Retirement Date: 100% of the value your pension in payment
• Private Pension Annuity (i.e. already in payment): 100%
• Private Pensions invested in traditional insurance company funds:100%
• Investment Funds: £50,000 per person per firm
• Insurance Company Funds: 100%

What this means is that if you have more than £50,000 invested in an investment linked individual savings account (I SA), unit trust, investment trust or similar collective investments you are only protected up to £50,000.

The shocker is that more and more people are investing their pensions in Self Invested Personal Pensions (SIPPs). This is when it becomes tricky. If you have chosen to invest your SIPP in investment accounts inside your pension such as unit trusts, investment trusts or similar collectives then you are only protected by up to £50,000 for each firm.

This is why the FSCS chief executive has called for changes as have we previously.

Your job for this weekend if you have a SIPP is to check that you have no more than £50,000 in investment accounts with any one firm.