One Response to “Is there any protection for defined-contribution pensions? What happens if my pension provider goes bust?”
Maren Alexander Said:
The PPF covers company defined benefit schemes. With defined contribution schemes, you put in your money, and hope the stock market is going well when you retire. If the company managing your money goes bankrupt, it shouldn’t affect your assets, as they do not own them. However the assets in the fund could lose value. This has happened to most peoples money in the last few months. You are not insured against this. Most providers do something called lifestyling, where they move your funds in to something less risky as you get close to retirement. Check your pension provider does this. Most will do it if you ask even if it is not the default. They usually move you in to government bonds and away from equities. If your annuity provider, which actually pays your income in retirement, goes under, you are covered by the FSCS if you are with a UK insurer. All annuities are provided by insurers. Insurers have to be very financially sound, and as far as I know no british insurers has gone down this century. If they fail you get 100% of the first £2,000 then 90% of the rest (it might be 95%, not sure.) How they work out what is the first £2,000 with an annuity I am not sure. It is the same scheme as life insurance, for which it makes more sense. In any case, you will keep at least 90% of your annuity. I do not know when a british long term insurer last failed. I can only think of two times major insurers have had difficulties, and both are still with us. One is lloyds of london, and the other is AIG. lloyds got in to trouble over general insurance, and is still trading and paying out on time. AIG is also still paying all its claims. Always shop around for annuities, as the rates vary a lot.
The PPF covers company defined benefit schemes. With defined contribution schemes, you put in your money, and hope the stock market is going well when you retire. If the company managing your money goes bankrupt, it shouldn’t affect your assets, as they do not own them. However the assets in the fund could lose value. This has happened to most peoples money in the last few months. You are not insured against this. Most providers do something called lifestyling, where they move your funds in to something less risky as you get close to retirement. Check your pension provider does this. Most will do it if you ask even if it is not the default. They usually move you in to government bonds and away from equities. If your annuity provider, which actually pays your income in retirement, goes under, you are covered by the FSCS if you are with a UK insurer. All annuities are provided by insurers. Insurers have to be very financially sound, and as far as I know no british insurers has gone down this century. If they fail you get 100% of the first £2,000 then 90% of the rest (it might be 95%, not sure.) How they work out what is the first £2,000 with an annuity I am not sure. It is the same scheme as life insurance, for which it makes more sense. In any case, you will keep at least 90% of your annuity. I do not know when a british long term insurer last failed. I can only think of two times major insurers have had difficulties, and both are still with us. One is lloyds of london, and the other is AIG. lloyds got in to trouble over general insurance, and is still trading and paying out on time. AIG is also still paying all its claims. Always shop around for annuities, as the rates vary a lot.