FSCS Limits in a pension

arongunningham

This is really basic, i know, but is it right that a SIPP with multiple investments with multiple institutions, will each have a £50,000 limit for protection?

benjaminfabi

Depends on the type of sipp and who the claim is against.

A pension investor in an insured scheme doesn't own the investments, only a right to the value of them, and has no fscs protection from default of any underlying investment fund manager (but that does not mean there isn't any protection).

The protection for the pension provider going into default is usually 100% of the claim with no upper limit.

arongunningham

oh right.

If I have a SIPP with 'retail' OEICs in - Fundsmith Equity, let's say. I can't claim £50,000 if Fundsmith go busto?

benjaminfabi

Correct. You don't own the assets, the trustees do.

arongunningham

How about the same question but in reference to Offshore Redemption Bonds (Ireland) - before Brexit screwed everything?

benjaminfabi

As for a pension, the investor can't make a claim to the FSCS in respect of the fund within an offshore bond defaulting on its obligation to investors, because the investor doesn't own the assets. It's further complicated with tax residency of the investor coming into play for FSCS eligibility.

There is a good guide by Utmost on this

https://utmostwealth.com/utech/utech-technical-guides-and-sales-aids/

Basically, lots of protection is in place to segregate funds before any losses will be incurred from the insolvency of a fund manager, platform or insurance company and before the end investor might need to go to FSCS. However, if they do need to claim, there are usually only two entities they can claim from:

• the insolvent advice firm eg following your claim for bad advice against them they can't pay you
• the product provider at the top of the custody chain (ie the owner of the application form you signed ie not the fund manager) if it becomes insolvent and can't pay your benefits

arongunningham

perfect, thank you