Is my pension safe?

When you’re working hard to pay money into a pension and plan for your future, you want to know that your money is safe. 

Recently, there’s been some media coverage about pension-related challenges, including scams and company difficulties, which might affect employee pension funds. While these stories are uncommon, it’s still natural to ask – is my pension safe?

Who are pension schemes regulated by?

In the UK, pension schemes are regulated by one of two regulators depending on the type of pension. These exist to ensure that your pension funds are secure and managed properly.

For pensions that are trust based, it’s The Pensions Regulator (TPR) that ensures schemes are properly run and comply with pension laws designed to protect savers. This includes workplace pensions, where a board of trustees manages the pension scheme in the interests of the scheme’s members.

The Financial Conduct Authority (FCA), on the other hand, looks after the regulation of personal pension schemes and the sale of workplace pensions that aren't trust-based. They also oversee the companies that provide the schemes and the advisors that give you pension advice. 

How safe is your pension?

There are defences in place to protect pensions if your employer, the Trustees of your pension scheme or your pension provider can’t pay your pension.

However, pension investments do have some risks. The value of a pension can go down as well as up, and you could get back less than the amount that's been put in.

The government’s Financial Services Compensation Scheme (FSCS) may provide protection should the scheme operator or product provider fail. The maximum level of protection depends on the type of pension arrangement you have.

What if my employer goes bust?

The majority of workplace pensions are defined contribution pensions – where you and your employer pay into a pension for you. They’re run by a pension provider rather than your employer, so you won’t lose your money if your employer goes bust.

It’s slightly different if you have a less common defined benefit or ‘final salary’ trust based pension where your pension is based on your salary and how long you’ve been a member of the scheme. This type of pension is more closely tied to your employer, with Trustees appointed to look after and administer the pension scheme.  Should the pension scheme fail then the government backed Pension Protection Fund (PPF) steps in. However, The Pensions Regulator overseas and monitors employers and those running workplace pensions to help protect your pension savings against this.

Your defined benefit pension will have a set age at which you can start drawing your pension.

• If you’re over the set age, then 100% of your pension at the date of insolvency is protected.
• If you’re below the set age, then 90% of your pension at the date of insolvency is protected. 

Personal pension and stakeholder pensions provided by UK regulated insurance companies are usually protected for up to 100% of the claim value should the company fail, whereas the protection for SIPPs is limited to a maximum of £85,000.  FSCS will usually try to move your pension to another provider so compensation is paid as a last resort. FSCS has a useful tool which can help you check the level of compensation, if any, that may be available in relation to your pension arrangement.

What if I lose money due to bad pension advice?

If you feel you’ve been mis-sold or given bad pension advice and you’re worse off because of it, you might be entitled to compensation. Especially if you’ve lost out financially, compensation would aim to put you back in the position you were in before the problem. 

Firstly, you’d need to make a compliant to the advisor or company that gave you the bad advice. If you’re not satisfied with the outcome, then you have a couple of options:

• If you have a complaint about how a business has dealt with your pension or financial services, you can reach out to the Financial Ombudsman Service. It's a free service that works to solve disagreements between consumers and businesses, helping to find a fair outcome without going to court.
  
• If you received poor pension advice that led to financial loss and the adviser has failed, you can contact the Financial Services Compensation Scheme (FSCS) and could be awarded up to a maximum of £85,000.
  

Am I protected from pension fraud and scams?

Sadly, pensions like other financial accounts where large sums of money are involved, are a target for fraudsters and scams. The good news is, if your pension is affected by theft or fraud, by one of the regulated firms involved in your pension scheme arrangement you might be eligible for compensation from the FSCS should that firm become insolvent. This applies to both workplace pensions and self-invested personal pensions.

While the risk is relatively small, there are sensible steps you can take yourself to reduce the risk of falling victim to pension fraud:

• Be sceptical and cautious of unexpected phone calls, emails, or messages about your pension, especially if they promise high returns or pressure, you to make quick decisions. Legitimate pension providers do not use aggressive tactics. Since 2019, unsolicited calls about your pension have even been banned. If you’re called about your pension, you should get as much information as you can and report it to the Information Commissioner’s Office via their website or by calling 0303 123 1113.
• Verify the credentials of the person or organisation contacting you, before providing any personal or financial information. Check as well if they are authorised by the FCA.
• Check your pension statements regularly and report any suspicious activity to your pension provider immediately.
• Safeguard your personal and financial information by using strong, unique passwords, and be cautious about sharing sensitive details online or over the phone.
• Check for red flags such as offers that seem too good to be true, requests for payment through unusual methods, or pressure tactics to act immediately.
• Stay informed about common scams and fraud tactics. Financial regulators like the FCA often publish alerts and warnings about ongoing fraud activity. 
• Speak with a trusted financial adviser who can help you to check if an investment opportunity is real if you're unsure.

Staying vigilant is key to protecting yourself from pension fraud and scams. If you suspect that you have been targeted or have fallen victim to pension fraud, you should immediately contact The Pensions Regulator. You should also contact Action Fraud and the Financial Conduct Authority (FCA) and give them as much information as possible about the scam.

If you’re an Aviva customer, you should use our scam report form to quickly let us know what’s happened.