Half of consumers unaware that FSCS protection applies to pensions

Just under half (49 per cent) of consumers do not think that Financial Services Compensation Scheme (FSCS) protection applies to pension products, research from Populus has found.

Furthermore, just 4 per cent were aware that the FSCS protects 100 per cent of a pension directly managed under a life insurance contract.

Commenting on the study, FSCS chief executive, Mark Neale, said: “Most pension products are fully protected by FSCS - so it is concerning that so few know about this.

“Pensions are a safe, reliable investment to provide income for retirement. It is therefore essential that the public has confidence that their pension is protected.”

Its research also found that consumer awareness of what protection is available if someone decides to withdraw their pension fund and put it into another product is low.

Only 5 per cent know that protection of up to £50,000 is available for any pension funds transferred into an investment product, and only 5 per cent were aware that an unlimited protection limit applies to an annuity.

Despite this, consumers are keen to learn; 78 per cent of respondents said that they would have a “higher opinion” of pension providers that “prominently communicate” the available FSCS protection.

Additionally, the same proportion (78 per cent) said that they would be more likely to opt for a pension provider that promoted FSCS protection over one that does not.

Currently, only 43 per cent of those with a pension are confident that it is safe if the provider goes out of business.

Neale added: “In March 2018 we launched a group, representing leading firms in the advisory and wider life and pensions sectors, which is working together to look at developing an industry best practice standard for disclosure.

“This group will offer a benchmark on how life and pension product providers convey information about FSCS to consumers.

“The Populus research shows that such work is needed to improve awareness”.

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