Savers in the dark on FSCS pension protection

Most people are unaware of the level of protection they receive from the Financial Services Compensation Scheme (FSCS) for pension products.

More than two-thirds (68%) of consumers think that protection for pensions is limited to just £5,000, according to the FSCS.

Only 4% of consumers were able to identify the correct level of protection.

The research also found that only a quarter (26%) of consumers believe that FSCS protection covers pension products generally.

The FSCS raised its limit to £85,000 for more of the financial products it covers in April.

As well as protecting deposits up to £85,000 in banks, building societies and credit unions, the higher FSCS limits now cover investments, mortgage advice, life and pensions advice, debt management and long-term care insurance.

Previous FSCS research shows that consumers are more likely to put their money somewhere that they know is safe.

It found that almost a third of consumers would invest a further £1,493 each year if they knew that the money in their pension fund was fully protected by the FSCS.

FSCS protects customers' money when authorised financial services firms fail. It protects deposits up to £85,000 and offers assurance that customers will get their money back even when the firm with which they saved or invested it fails.

However, it does not protect deposits in the event that it is invested poorly and loses value. 

Mark Neale, outgoing chief executive of the FSCS, says: "This research confirms the currently low levels of consumer awareness of pension protections. Consumers can be confident that if they have a pension or an annuity, it is fully covered by FSCS should anything happen to their provider.

“Such protection is not the case for all financial products available to take you through retirement, so consumers should ensure that they are aware of the different protection limits.”

The FSCS says it is working with industry to establish a set of best practice standards for pensions protection disclosure to ensure that consumers are able to make informed decision about their retirement.

This article was originally written by our sister publication Moneywise.

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment