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More than 43,000 claims have been made for close to £2bn worth of lost retirement savings in the past five years alone, analysis shows.
The Financial Services Compensation Scheme (FSCS) protects customers of financial firms, and its own data show that since 2019 it has had 43,000 claims for pension losses when authorised financial providers and advisers went out of business.
It has certain rules on what it can pay out on – with a key term being that it will typically limit compensation to £85,000 per provider.
FSCS has said that most claims come from people aged between 45 and 75, and these people could have built up pension savings larger than this amount, and risk not getting all of their money back.
Martyn Beauchamp, interim chief executive at FSCS, said pension losses were having “serious consequences” for thousands of people every year.
“FSCS has long highlighted the importance of checking that your pension savings are protected, as these types of claims often come to us long after the financial harm may have occurred – and by that point it can often be too late to rebuild before retirement,” he said.
FSCS protects pensions and self-invested personal pension products that are regulated by the Financial Conduct Authority and the Prudential Regulation Authority as well as other financial products such as deposits held in banks and investments.
Of the total £2bn worth of claims, it has paid out £1.2bn relating to pension and Self-Invested Personal Pension (SIPP) products.
FSCS has a checker tool on its website, which people can use to check whether their retirement savings are covered under the scheme.
FSCS usually sees claims from people who have received unsuitable financial advice in relation to their retirement savings from financial advisers who subsequently go out of business, or where their SIPP operators have gone out of business.
With SIPP operator failures FSCS may be able to support customers by funding a transfer to an alternative provider, as well as paying compensation for financial loss.
Those worried about the £85,000 limit should also speak to their pension providers or advisers about how their pensions are structured and what protections are in place for their particular schemes or the advice they have received.
Those with “defined benefit” pensions, a type of pension that provides a fixed income each year in retirement, should find out more about the protection provided by the Pension Protection Fund.
This scheme provides support if the employer funding this type of pension becomes insolvent.
