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Protecting Your Pension: Navigating Risks and Protections in Your Retirement Savings

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Your pension is a valuable asset after years of hard work and dedication. You want to ensure that you have a comfortable retirement, but there are unscrupulous individuals and market fluctuations that could potentially threaten your savings. Let's take a closer look at how safe your pension is.


How safe is my pension?


Don't let the negative press get to you. There are robust measures in place to protect the majority of pensions in the UK. The Financial Services Compensation Scheme (FSCS) provides full protection of up to £85,000 per person per institution if your bank fails. This amount also covers pensions and investments and the Financial Conduct Authority is in place to monitor industry practices. With these precautions, you can feel secure knowing your pension is well protected.


Has the pandemic impacted my pension?


The pandemic has caused stock markets to fall, leading to short-term volatility. However, it's important to remember that investments tend to rise over time, so it's best to stay the course and let your pension recover.


How is my workplace pension protected from employer insolvency?


If you have a Defined Contribution (DC) scheme pension from your workplace, it is managed by a pension provider, so your pension will not be affected if your employer goes bankrupt. Some DC schemes, known as trust-based schemes, are run by a trust appointed by your employer. In this case, you will still receive your pension, but the running costs will be taken from your pension pot.


For those with a final salary scheme pension in the private sector, if your employer goes out of business, the Pension Protection Fund will pay your pensions. You may receive 100% compensation if you have reached the pension age and 90% if you are below the scheme’s pension age. Public sector pensions, funded by taxpayers, cannot go bankrupt as payments come from government spending.


What if my pension provider goes bust?


If your pension is regulated by the Financial Conduct Authority, you will receive compensation from the FSCS in case of your pension provider's failure. The FSCS will attempt to transfer your funds to another pension company, but if that is not possible, you are entitled to 90% of your savings back.


Is my personal pension protected?


The FSCS protects up to £85,000 per person per institution. It does not cover losses, but it serves as a safety net in case the pension or investment firm fails. If you have a stakeholder pension, it is covered by the FSCS’s long-term insurance, which covers 90% of the pension's value. If you have a SIPP, the money held in cash will receive the same protection as cash savings.


What if I lose money due to bad pension advice?


If you receive questionable pension advice or have been mis-sold by an Independent Financial Advisor (IFA), you may be eligible for compensation from the FSCS up to £85,000 per person per firm, as long as the provider is regulated by the Financial Conduct Authority (FCA).


Am I protected from pension fraud?


Unfortunately, pension fraud does occur. It's important to be vigilant and aware of the signs of scams. The Pension Advisory Service recommends declining unexpected pension offers made online, through social media, or over the phone. Verify the credibility of your trading partner before making any changes to your pension arrangements. You can check with the FCA helpline on 0800 111 6768 or the FCA register. Don't rush into any decisions and consider seeking impartial advice.


In the event of fraud or theft and there is a shortfall in your company’s pension fund, you may be able to claim compensation from the FSCS. To gather full guidance on this – or if you want to submit a complaint about the way your workplace pension scheme is run, you can’t take a complaint direct to the Ombudsman, you have to complain to your provider first. They are regulated and must reply within a set timescale – if they don’t or if you’re unhappy with the resolution then you can go to the Ombudsman.


Reeves Independent offer honest, transparent and clear advice. We put our clients at the heart of everything we do and strive to work alongside our clients so they can achieve their retirement goals.


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The contents of this post are not intended as and should not be taken as advice. Any actions taken on your financial products may be irreversible and could negatively impact your financial planning, so we recommend seeking personalised financial advice before acting. Investment performance is not guaranteed, past performance is not an indicator of future performance, and you may get back less than your original investment.

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