Consumers underestimate FSCS protection
The FSCS protects consumers when financial firms fail. It covers most major banks, brokers and insurance providers, but consumers need to check that they are with a regulated firm covered by the scheme. The recent failure of London, Capital & Finance, for example, was not covered by the scheme.
The research showed understanding of the FSCS limits is poor: Over two-thirds (68%) of consumers think FSCS protection for pensions is limited to just £5,000 and only 4% of consumers (less than one in 20) were able to identify the correct level of protection, currently £85,000.
Only a quarter (26%) of consumers believe that FSCS protection covers pension products. Previous research has shown that around one-third of people would invest more if they knew their pension was protected.
The FSCS said it is now working with the financial services industry to promote better information and establish a set of best practice standards for pensions protection disclosure to ensure that consumers are armed with the right information to make an informed decision about their retirement.
Mark Neale, chief executive of FSCS, said: “This research confirms the currently low levels of consumer awareness of pension protections. Consumers can be confident that if they have a pension or an annuity, it is fully covered by FSCS should anything happen to their provider. Such protection is not the case for all financial products available to take you through retirement, so consumers should ensure that they are aware of the different protection limits.
“We are working with leading firms in the life and pensions sector to ensure that the industry agrees a consistent approach to disclosing pension protection information. This working group, launched 18 months ago, will shortly publish guidelines on how life and pension product providers inform consumers about FSCS.”