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Who protects your pension and is it safe?

If you're worried about the security of your pension – don’t panic. We explain how your pension could be protected to help put your mind at ease.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

The past couple of weeks has brought lots of uncertainty, and you might be wondering about the security of your pension.

Thankfully there are a number of protections in place to make sure your pension is protected, in the unlikely event that your provider goes bust.

The information in this article is provided for your interest and to help you make your own decisions but is not personal advice. If unsure, please seek advice.

So what happens to defined contribution pensions?

If you have a defined contribution pension (including personal pensions, stakeholder pensions and some workplace pensions) and your provider is regulated by the Financial Conduct Authority (FCA), you’ll be eligible to claim compensation from the Financial Services Compensation Scheme (FSCS). This will apply to you if your provider ever goes out of business and isn’t able to meet their obligations to you.

Annuities are normally covered by the FSCS too, provided the annuity provider is authorised by the FCA. This could act as a safety net should your annuity company go bust.

Find out if my provider is regulated

What if I have a defined benefit pension?

If you have a defined benefit pension (like a final salary or career average pension), you’ll normally be covered by a different protection scheme. If your employer goes out of business and there isn’t enough money in the pension scheme to pay members’ benefits, you might be able to make a claim through the Pension Protection Fund (PPF).

The compensation amount will depend on how close you are to your scheme’s normal pension age at the time the employer becomes insolvent. If you’ve not yet reached the scheme’s normal pension age you could still get 90% of the annual pension due on the insolvency date. If you’ve already passed the scheme’s normal pension age, or had to retire early because of ill health, you’ll normally get 100% (subject to the PPF compensation cap).

What if I have an HL SIPP?

We’re a secure FTSE 100 company trusted by over one million clients and we’re regulated by the FCA.

Any cash you decide to hold in your HL Self Invested Personal Pension (SIPP) is held by us in trust and it’s kept separate from our own funds. This is in line with the FCA’s client money rules and guidance so that any creditors of Hargreaves Lansdown wouldn’t have a legal right to it.

Our policy is to only hold cash with institutions that have a UK banking licence and are covered by the FSCS. The FSCS is backed by the government and protects clients’ deposits up to £85,000 per institution. We’ve done this to protect our clients in the unlikely event that a bank, building society or credit union defaults.

We spread client money across a range of banks using a minimum of five banking licenses (the spread of balances can change throughout the day). A client’s individual level of protection will depend on their collective balances held per banking licence (including any balances not held with HL).

If you’re invested there’s also FSCS protection that applies. Usually this won’t protect you if your investments perform badly – this is the risk you take with investing. But investors are likely to be covered by the FSCS if Hargreaves Lansdown stops trading. It can award up to £85,000 in compensation to any one investor where they decide that an investment business is in default and is unable to satisfy any claims against it. FSCS protection might also apply if the manager of a fund fails and the fund is unable to pay out the value of its underlying investments.

Please remember that unlike cash, all investments rise and fall in value, meaning you could get back less than you invest.

Find out more about account security

What happens if I don’t know who my pension provider is?

If you don’t know the company that holds your pension – don’t worry, you’re not alone. In the UK it’s estimated that there are around 1.6 million lost pensions worth £19.4 billion – that’s nearly £13,000 per pot.

Luckily the government has a free pension tracing service and can help you track down any pensions you’ve lost. Even if you don’t have the contact details of the pension provider or you don’t know the name, they can help.

Before using the service it’s best to gather as many details as possible, including;

  • The name of your previous employer
  • The type of business it was (or still is)
  • The address of the company
  • When you started employment
  • Any old pay slips

This service will tell you the name of your pension administrator and their contact details. You’ll then need to contact the administrator directly to find out if you have a pension pot, how much it’s worth, and what, if any, protection scheme they fall under.

Try the pension tracing service

Bring your old or lost pensions together under one roof

Many of us go through a number of different jobs, and each job could mean a different pension pot. Keeping on top of many different pots can sometimes be difficult. You’ll have a number of different pension statements to juggle and each pension is likely to come with a different set of charges.

You could consider transferring them to one easy-to-manage account, like the HL self-invested personal pension (SIPP). That way you can check how your entire pension is doing anytime online and with the HL app. We also offer support and guidance to help you manage your pension as easily as possible. We also offer investment analysis, pension tools, and if you request and pay for it, personal financial advice.

This information is not personal advice. If unsure, seek advice. If you’re thinking about transferring, please check you won’t lose valuable guarantees or benefits or have to pay excessive exit fees. Transfers are usually made as cash, so you would miss out on any market rises or falls for a period.

More on transferring

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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