Are pensions protected in the UK? Mostly, but which safety net applies depends on the type of pension and on what has failed.
Your pension can run into trouble in three separate ways: the firm holding it can fail, an employer standing behind it can fail, or money can be stolen. Each has its own safety net, and none of them covers a fall in investment value. This guide sorts them out so you know which one applies to your pots. Unsure which of your pensions sits under which safety net? An FCA-authorised adviser can ring and sort that out free of charge if you tell us how to reach you through the form on this page.
Are pensions protected in the UK? Which safety net fits which failure
The table sets out who steps in. The sections after it give the limits, as the organisations print them.
| What has gone wrong | Pension type | What may step in |
|---|---|---|
| Insurer behind your personal or stakeholder pension fails | Contract-based defined contribution (DC) | Financial Services Compensation Scheme (FSCS) |
| SIPP operator, or the firm holding an investment, fails | SIPP, or DC in a trust | FSCS, with a cap |
| Employer goes bust, promised pension cannot be paid | Defined benefit (DB, such as final salary) | Pension Protection Fund (PPF) |
| Employer goes bust | DC, run by your provider or a trust | The pot is yours; trust-based running costs may fall on members |
| Fraud or theft reduces a scheme's assets | Occupational scheme | Fraud Compensation Fund |
This guide covers private and workplace pensions, as the FSCS, PPF and Pensions Regulator describe their rules for the UK. The State Pension is a separate matter and is not one of the pots below.
Is my personal pension or SIPP protected by the FSCS if the provider fails?
Often yes, up to different limits depending on what failed. The FSCS is the UK's compensation scheme for authorised financial firms, and its pensions page sets out three cases for a firm that failed after 1 April 2019:
- Your pension provider failed. It "can normally pay 100% of your claim, with no upper limit".
- Your SIPP operator failed. The cap is £85,000 per eligible person, per firm.
- A firm gave you bad pension advice. The same £85,000 per eligible person, per firm applies, provided the adviser has failed. If the adviser is still trading, the FSCS points to the Financial Ombudsman Service.
Those are the FSCS limits for a firm failing after 1 April 2019, as its pensions page prints them; firms that failed earlier had lower limits, set out in the questions below.
Why is the provider case uncapped and the SIPP case capped? The FSCS says UK-regulated insurers' pensions can generally be protected "as long as they qualify as 'contracts of long-term insurance'", which most personal and stakeholder pensions do. SIPPs are "typically deemed 'uninsured' pension schemes" and are treated differently. The FSCS cannot confirm for an individual plan which category it falls into, so the provider is the one to ask. What a SIPP is and how its operator differs from the investments inside it is in the SIPP guide.
An annuity bought from an insurer sits on the uncapped side, and what happens if the annuity provider goes bust goes into the rules for continuing the income.
When the failed firm held your investments
A separate rule applies when the thing that fails is a firm holding the investments. Where an investment sat inside a personal pension such as a SIPP, or inside a DC occupational scheme, and its UK-regulated provider fails, the FSCS may be able to pay up to £85,000 per pension scheme member. Whether your own SIPP holdings fit depends on how they are arranged, which an adviser can unpick for you at no cost once the form here is sent.
What happens to my workplace pension if my employer goes bust?
It depends on whether the scheme promises an amount (defined benefit) or builds a pot (defined contribution).
Defined contribution: the pot is yours, with one catch for trusts
GOV.UK says DC pensions are usually run by pension providers, not employers, and that "You will not lose your pension pot if your employer goes bust." If the provider itself is FCA-authorised and cannot pay, a claim to the FSCS is open, as above.
Some DC schemes are run by a trust appointed by the employer. In a trust-based scheme the pension still arrives if the employer goes out of business, but GOV.UK warns you "might not get as much", because the running costs fall on members' pots instead of the employer. That is a gap in the protection rather than a cap on it. How much it takes from members depends on the scheme, and its trustees can explain that. The FSCS also says it cannot protect an occupational pension scheme itself if the scheme fails, so the compensation scheme sits behind the firms involved rather than the trust.
Defined benefit: the Pension Protection Fund
Here the employer must make sure the scheme holds enough to pay every member the promised amount, and it cannot touch the money in your pension if it is in financial trouble. If the employer goes bust and cannot pay your pension, GOV.UK says you are usually protected by the PPF. Its usual payment is 100% compensation from the scheme's pension age and 90% for anyone younger than that age.
The PPF does not protect DC schemes or public sector schemes, and its ineligible list adds schemes with a Crown guarantee or fewer than two members. The full conditions, the cap history and yearly increases are in how the Pension Protection Fund works, and the layers of funding rules before it get to the PPF are in are final salary pensions protected. The PPF also runs the Financial Assistance Scheme on behalf of the Government, a separate fund with its own qualifying rules.
What the Fraud Compensation Fund covers when money goes missing
The PPF is also responsible for the Fraud Compensation Fund (FCF). GOV.UK says that where a company's pension fund is short "because of fraud or theft", you may be eligible for compensation from it.
The legal test is narrower than it sounds. Under Pensions Act 2004 s182, which covers England, Wales and Scotland, the PPF's board makes payments for an occupational pension scheme when its assets have been reduced and there are reasonable grounds to believe the reduction was attributable to "a prescribed offence". The PPF must also have issued a binding notice that the scheme has failed or cannot be rescued, for example after the employer's insolvency. The application must be made by a person prescribed in regulations, within 12 months of the later of the relevant event or the time the scheme's auditor, actuary, trustees or managers knew, or ought to have known, of the reduction, unless the PPF allows longer.
If you are worried about your own scheme, ask the trustees whether they have raised any concern with the Fund. A scam that persuades someone to move their pot out is a different matter: how those work is in the pension scams guide, including who to tell if one has already happened.
What the Pensions Regulator does, and who else to contact
The Pensions Regulator (TPR) describes itself as the UK regulator of workplace pension schemes. It makes sure employers put staff into a scheme and pay into it, and that schemes "are run properly so that people can save safely". Compensation comes from the funds described above; TPR's own role is about how schemes are run.
For trust-based DC, one visible part of that is the master trust regime: TPR says anyone running a master trust must comply with duties set out in the Pension Schemes Act 2017. TPR also says breaches of pensions law should be reported to it. For what its powers include, see are UK pension schemes regulated.
If a problem is with an authorised firm, the FCA register is where to check it is covered by the FSCS. If your employer has not paid your contributions in, what to do when employer pension contributions are not paid covers the steps.
Can you lose your pension? What none of these safety nets cover
Yes. Protection is against a firm or scheme failing, not against a poor result. The FSCS says it cannot accept claims for poor investment performance, because the value of investments "can go down as well as up". A DC pot invested in shares or funds can be worth less than you paid in.
- Investment losses are not compensated. They are a normal risk of investing.
- Unregulated firms fall outside the FSCS, which needs the PRA or FCA to have authorised the firm and regulated the service and product it provided.
- Schemes the PPF does not protect include DC and public sector schemes. Ask the scheme itself what stands behind a public-service pension in England, Wales, Scotland or Northern Ireland.
- Scams are a separate risk with their own guide: how pension scams work.
Listing which pots are DB, contract DC, trust DC or SIPP is the useful first job, and a free call with an adviser to do it can be arranged through the form here. Free guidance on your options is also available from Pension Wise.
Questions people ask about pension protection
Do the FSCS limits apply to each pension I hold?
Cover for an insurer's pension has no upper limit, so this matters for the capped cases: the FSCS states the £85,000 for a SIPP operator or a failed adviser per eligible person, per firm. How several pots with one firm are counted is a question for the FSCS or your provider, since it turns on which firm and which contract failed.
Is the Pension Protection Fund the same as the FSCS?
No. The PPF protects members of eligible defined benefit schemes when the employer fails; the FSCS protects against the failure of authorised financial firms such as insurers, SIPP operators and advisers. The FSCS says it cannot protect occupational schemes, which the PPF may.
How do I check my provider is covered by the FSCS?
Search the firm's exact name on the FCA register, which the FSCS points to for this purpose. The FSCS also says to check that the activity itself, such as giving advice, is regulated. Your provider can confirm in writing.
What if my pension firm failed years ago?
The limits were different. For SIPP operators and advice the FSCS prints £50,000 where the firm failed between 3 July 2015 and 31 March 2019, and 90% of the claim for a provider failing between 1 January 2010 and 2 July 2015. For anything earlier, the FSCS can say what applied.
Does the FSCS cover bad advice to transfer a pension?
It may. The FSCS gives transferring as an example of bad pension advice and says it may pay up to £85,000 if the UK-regulated adviser has failed. If the adviser is still trading, a complaint to the Financial Ombudsman Service is the route. Advice before some transfers is a legal requirement, covered in when advice is required before a transfer.
Checking where your pensions stand
Pensions are protected against firms and employers failing, with different limits for each type, and not against investments falling in value. The next step is working out which of those types you hold. Leave your number in the enquiry form if you want to talk yours through; the adviser who rings works for an FCA-authorised firm and the call costs nothing.
Sources: FSCS, Pension protection and Investment compensation and protection; GOV.UK, Protection for your pension; PPF: Who we protect and What we do; Pensions Act 2004 s182; TPR: About us, Master trust pension schemes and Avoid and report pension scams.