The Daily Telegraph - Saturday - Money
Landmark court case could ‘open the floodgates’ to claims
“defined contribution” pension plans. Employers pick their own pension providers, in most cases offered by well-known insurance companies regulated by the Financial Conduct Authority (FCA), or “master trusts” under the auspices of the Pensions Regulator.
In both cases, an employer going bust will not have an impact on the money in your pension. If the pension provider goes bust and is regulated by the FCA, you can make a claim on the Financial Services Compensation Scheme (FSCS). Prior to retirement, 100pc of your money is guaranteed but post-retirement, only £85,000 of cash savings and £50,000 of investments are protected.
Around 10 million people have savings in excess of £16bn in master trusts but, until recently, protections have been limited. From October all master trusts will have to be authorised by the Pensions Regulator. To do so they must prove trustees are “fit and proper” and that enough cash is being set aside.
Both insured personal pensions and Sipps are overseen by the FCA. Nearly two million people are thought to save into Sipps and most failures have been in this sector. The problems often stem from unusual and unregulated investments, such as storage pods, sold in the years before regulations were tightened.
As a result many firms do not want to take on what are considered toxic assets. When investments turn sour, Sipp companies often argue the responsibility should lie with advisers or individuals themselves.
John Moret, an expert in Sipps, said an ongoing High Court battle between Sipp firm Carey Pensions and an investor could mark a “watershed moment”.
He said: “If the court finds Carey is responsible even though it didn’t give advice then we’ll see a lot more claims. That could really open the floodgates.”
‘People will be panicking – it’s all bad news at the moment’