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FSCS: Providers should flag compensation fund to boost pension saving

Pensions-savings-retirement-piggy bankConsumers will invest more in their pension if they are aware it is protected by the Financial Services Compensation Scheme, new research indicates.

The research, undertaken by Populus for the lifeboat fund, surveyed 2,067 UK adults from 25 to 28 May 2018.

It looks at consumer expectations about what pension providers should do to explain the protection that is available for their products.

The findings show 80 per cent of respondents would feel “more reassured” by a pension provider that prominently communicates the fact that its products are FSCS protected.

It finds 29 per cent of people would invest more if they knew that their pension fund was fully protected by FSCS.

On average, each person within that group said they would invest a further £1,493 each year.

Consumers were asked about the best ways their pension provider could promote the FSCS protection.

Two-thirds think this information should be promoted on their annual statement and 37 per cent support it being communicated via their employer’s HR department.

Just under a third, 31 per cent, say the provider should highlight the FSCS protection on its website.

FSCS chief executive Mark Neale says: “We have seen with our work in the deposit sector just how important FSCS protection is in reassuring consumers and increasing their trust in financial institutions.

“This research suggests that more prominent promotion of FSCS can have a similar impact in benefiting both consumers and providers in the pension sector.

“People will save more if they are confident their pension fund is safe and firms in turn will see reputational benefits if they prominently promote the available protection.”

In March 2018 the FSCS launched launched a group representing the advisory and wider life and pensions sectors, 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 the FSCS to consumers.



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. IMO, more customers are worried by investment loss than the risk of the provider going bust.

    My only concern is whether this could confuse the customers, who will mix up the two forms of risk.

  2. On reflection, if their sample would on average contribute another £1.5K PA, then their current contributions must be significant.

    The protection provided by the FSCS on investments is only £50K.

  3. Nicholas Pleasure 7th November 2018 at 9:15 am

    This is a bit like an airline advertising cheap flights to Spain on the basis that there is a lifejacket under every seat.

    Like pensions in the FSCS, in the event of anything serious happening the lifejacket is unlikely to do you much good.

  4. The obvious risk of further promoting the FSCS is that consumers will be deluded into the belief that investment is a no-lose bet, counteracting the very considerable work we do to ensure every client goes in with a full understanding and their eyes wide open.

  5. The outcome of a survey such as this depends to a large extent on what questions were asked, how they were framed and what questions WEREN’T asked, e.g.

    1. Has 32 years of relentless government meddling, tinkering with and complication of the pensions framework undermined your confidence in the very idea of locking away money into a registered pension arrangement?

    2. Do you see any signs of this changing (for the better)?

    3. Are you aware of the cap imposed by the government on how large a pension fund you can accumulate without running into tax penalties should you exceed it?

    4. Do you have confidence in the competence of the FCA to protect people from the depredations of scam and rip-off merchants?

    Faced with all that, I imagine that a large number of respondents might well be considerably less enthusiastic about the idea of ploughing more money into their pension arrangements. In fact, many might well say NFW.

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