QROPS, SIPPS and Compensation

Concern about pension providers going bust is becoming a hot topic.

Standard UK pensions have a life insurance element to them, making them covered by insurance compensation, which is 100% of the first £2,000 and then 90% of the rest with no upper limit.

For example if you had a pension pot of £500,000 and your UK pension provider went bust you would receive £2,000 plus 90% of £500,000, which is £450,000. That’s a total of £452,000 and a loss of £48,000. As you can see, you still take a hit but this hasn’t shattered your retirement dreams.

Many individuals have taken advantage of self invested personal pension plans or SIPPs. Its important to realise that if a SIPP provider goes bust the assets of the SIPP could be at risk!

Those with SIPPS are protected under the investment compensation scheme. This protects the first £30,000 at 100%, then 90% of the next £20,000 only. This means that the maximum protected is just £48,000. So if you had £500,000 then receiving just £48,000 will be considerably less then if you had a standard pension as described above. This would leave your dream of owning a yacht quickly taking on water and sinking.

QROPS allows for a much wider expanse of investment opportunities. Many are transferring into a QROPS and placing their money in funds wrapped up in a life assurance structure. This gives them the insurance compensation protection and with Guernsey compensation being 100% of the first £2,000 and then 90% of the rest with NO limit, a transfer to QROPS is proving to be a very safe move.

To discuss your situation and how we can help you make the best financial move, fill out the contact form here and we will contact you as a priority