Consumers unaware of FSCS pension protection

Less than one in twenty consumers are aware their pension is 100 per cent protected by the Financial Services Compensation Scheme if directly managed under a life insurance contract, research has found.

The FSCS consumer survey by Populus also found 49 per cent of respondents do not think FSCS protection applied to pension products.

The lifeboat scheme says there is low consumer awareness of the protection for funds taken out of a pension. Only 5 per cent of consumers knew there is protection of up to £50,000 available for any pension funds transferred into an investment product. And for annuities, it was only 5 per cent of respondents who knew of the unlimited protection the FSCS provides for these products.

Nearly half, 43 per cent,of consumers said they feel more confident if a pension promotes its FSCS protection and 78 per cent said they have a higher opinion of pension providers clearly communicating the FSCS protection available.

The body says it wants to improve consumer awareness of FSCS protection and to that end it is supporting an industry working group to identify a best practice standard for pensions disclosure.

FSCS chief executive, Mark Neale (pictured), says the findings are worrying: “Most pension products are fully protected by FSCS – so it is concerning 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.”

Neale explains the steps taken to improve awareness:

“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.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Aren’t all KFD’s and SR’s supposed to highlight the protections afforded by the FSCS? The levels of ignorance reported here just go to show how little notice consumers take of all the tonnages of paperwork that the FCA insists must be foisted upon them. The idea that this engenders better consumer engagement is just another regulatory wet dream.

    • Yes, but the quoted comments in the article initial add to the confusion as I did a double take and had to go back and look at what he meant/said rather than what he appeared to say/imply in the first few lines of the article.
      A pension product is only covered up to £50k (currently) under the FSCS. It is only annuities that are 100% protected and I think that is on a level annuity basis correct me if I am wrong? https://www.fscs.org.uk/what-we-cover/

      • FSCS Website :-

        Long-term insurance (e.g. pensions and life assurance)

        from 3 Jul 2015
        100% of the claim with no upper limit.

        from 1 Jan 2010 – before 3 Jul 2015
        90% of the claim with no upper limit.

        before 1 Jan 2010
        100% of the first £2,000 plus 90% of the first remainder.

        The above dates relate to when the firm failed, not when you received your advice.

      • FSCS Website (part 2)

        Pensions (compensation limit is dependent on how the pension funds are invested)

        Deposits in a bank, building society or credit union.
        £85,000 per person per firm.

        If placed directly in investments including claims relating to bad investment advice, poor investment management or misrepresentation.
        up to £50,000 per person per firm.

        If drawing a set retirement income from a life insurance contract (i.e., annuity) or if building up a pension pot which is directly managed by a life insurance contract.
        100% protected.

        Investment life policy savings: long-term life insurance policies which have a savings element, such as endowment policies or investment bonds.
        100% protected.

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