How safe is my pension?

piggyThis is one of the five most commonly asked questions I’ve been asked in my time advising members of workplace pensions in the past 25 years. In that time I have only advised on one scheme where members lost their benefits (Allied Steel and Wire) and that was a defined benefit scheme that went bust because of a combination of incompetence , poor markets and advice that was scandalously wrong. Today, the Financial Assistance Scheme and the Pension Protection Fund would provide most members with a safety net that would mean that even in extreme circumstances, they would be protected from such malfeasance.

No-one can of course protect people from their own stupidity as has become clear with the revelation that thousands of folks with secure pensions are liberating them before normal retirement. This is like asking a pick-pocket to liberate you of your wallet. We cannot totally protect people from themselves.

But putting aside the outliers the defined benefit legacy and the feckless behaviour of the terminally short-sited, the answer to the question posed is “pretty damned safe”.

If your pension is with an insurance company and is going to provide you with an amount based on investment returns and contributions (DC) then you have a very high degree of protection. The insurance company is regulated by the FCA to ensure it is fully solvent, the investment management company is regulated to ensure it is treating you fairly and where your scheme is looked after by trustees the Pension Regulator is involved with ensuring it is properly managed according to its governance codes.

That said there are things you should be asking the provider of your pension (whether you are acting as an employer or asking as a member). Here are the ten questions I would be asking!

1. Is my provider still actively seeking new schemes or are they close for new business?
2. Can my provider explain the governance arrangements in place to ensure that my pension is safe can I see them?
3. Is there a statement of investment principles issued by those who govern the pension scheme?
4. Are there any administration reports available from my provider (FRAG)
5. Has my provider agreed to abide by the ABI code of good conduct as regards at retirement practice?
6. What advice is in place to my employer and how recently has a scheme review been carried out?
7. In the event of fraud or malfeasance, what compensation schemes are in place?
8. Has the provider confirmed that they will be able to operate the scheme as an auto-enrolment scheme for my company?
9.If I need to make a complaint about the service I or my company are receiving, what is the procedure?
10.Which Rgulator(s) have responsibility for my scheme?

In practice, there is very little you can do to as an individual to make sure that your pension is safe and well governed. As a corporate representative you have the right to put pressure on your provider to improve or else to move the pension elsewhere.

You are unlikely to get positive answers to all these questions but the answers you receive will tell you a lot about how serious the provider or your trustees are about guarding your and your colleagues interests.

As I stated at the beginning of this article, you are well protected and much better protected than you were before the pension scandals of the nineties. It is unlikely that we will see the wholesale plundering of a pension that happened with the Maxwells nor the recklessness of the Equitable Life.

The new threat to the safety of your pension is more likely to come from it being deemed a legacy arrangement and put in the pensions attic by your provider. The biggest worry for you is that your provider is or is about to “out of the market”.

What is critical, if this is the case, is that you (as an employer) look to ensure that going forward, you align your workplace pension with a provider with a strong committment to workplace pensions now and into the future.

Ultimately the question is as much about durability as security and there are but a
handful of pension providers who can demonstrate that durability that can make you feel quite safe.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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