What happens to your annuity if the provider goes bust?

If your annuity provider goes bust, the FSCS can protect the annuity at 100% with no upper limit, provided the insurer and the contract qualify.

That is the short version of what the Financial Services Compensation Scheme (FSCS) says. This guide sets out the conditions behind it, what the regulator's rules say would happen to your income, and how to check your own insurer. Pension Wise, from MoneyHelper, offers a free appointment on the options for taking money from a defined contribution pension, and it is impartial and backed by government. For a second pair of eyes on your annuity papers, an FCA-authorised adviser will telephone once you send off this page's form; that enquiry costs nothing.

When an annuity is protected

The FSCS's pensions page says it can generally protect pensions provided by UK-regulated insurers, as long as they qualify as ‘contracts of long-term insurance’, and gives an annuity as a common example. Where it can pay compensation, the cover is 100% with no upper cap. Three conditions sit behind that:

• The insurer. The company that failed must have been regulated by the Prudential Regulation Authority (PRA).
• The contract. It must count as long-term insurance, which the scheme cannot confirm for individual plans; your provider is the one to ask.
• The date of the failure. Annuities are on its list of insurance claims repaid in full if the firm failed on or after 3 July 2015; if it failed before then, claims are 90% protected.

One date on the pensions page can confuse: its headline gives 100% for a provider that failed after 1 April 2019, but its historical table shows the same 100%, with no upper limit, for provider failures between 3 July 2015 and 31 March 2019. The 2019 date matters for the SIPP and advice limits below, not for annuities. What an annuity is and how it pays is in our pension annuity guide; this page deals only with the insurer failing.

What would happen to your annuity income

The FSCS's protection follows the PRA's rulebook, and its Policyholder Protection Part puts keeping cover going ahead of a cash payout. Rule 4.1 says that when the insurer is in insolvency proceedings the FSCS must make arrangements to secure continuity of a long-term insurance contract, if that is reasonably practicable and, in the FSCS's opinion, beneficial to the generality of eligible claimants. Rule 4.2 says this can mean transferring the failed insurer's long-term business to another firm, or having another firm issue policies in substitution for existing ones.

Two further rules bear on an income already in payment. Rule 4.3 covers the period while continuity is being sought: the FSCS must secure 100% of benefits as they fall due, paid as soon as reasonably practicable after the due date and on the contract's other terms. Rule 6.1 then requires that, once continuity is arranged, the claimant receives 100% of any future benefit, on terms corresponding in all material respects to the old contract, so far as that appears reasonable to the FSCS in the circumstances. ‘Benefit’ in both rules leaves out any bonus not declared before the insolvency, and any amount the FSCS has determined to reduce or disregard under its rules.

An insurer can also be in financial difficulties short of being wound up, for example where the PRA determines it is likely to be unable to satisfy protected claims. Rules 5.1 and 5.2 then let the FSCS take measures such as a transfer of business, assistance to the insurer or substitute policies, on terms that may include “reducing or deferring payment” of benefits. For long-term insurance, though, those measures are subject to the 100% future-benefit requirement in 6.1. A separate chapter covers an insurer under a write-down order, where the FSCS funds top-up amounts towards the level of cover it would otherwise pay.

If continuity is not arranged, compensation is the other route. Rule 17.2 sets cover for a long-term insurance contract at 100% of the claim with no upper limit, and the FSCS repays such claims once the insolvency practitioner managing the failure accepts them. Which route is used depends on the failure. Cashing in is covered in can I withdraw from an annuity, moving it in the transfer rules, and payments after death in annuity death benefits.

Different limits for SIPPs, advisers and workplace schemes

The 100% figure is for an insurer failing. The FSCS's pensions page gives a separate limit of up to £85,000 per eligible person, per firm, where a SIPP operator fails or a firm that gave bad pension advice fails; the SIPP guide explains why a SIPP is a different kind of product. So if an adviser arranged your annuity and the adviser goes out of business, a claim about that advice falls under the £85,000 limit, not the insurer rule.

A workplace final salary pension has a different safety net again. The FSCS cannot protect occupational pension schemes, which may be protected by the Pension Protection Fund (PPF); the PPF protects members of defined benefit schemes and does not protect defined contribution ones. See how the Pension Protection Fund works and what a final salary pension is.

Two facts are worth having to hand: the legal name of the insurer that holds your contract, and whether the contract counts as long-term insurance. Both questions can be put to an FCA-authorised adviser, who calls back when asked to through this page's form.

What the PRA does not promise, and checking your insurer

The PRA, part of the Bank of England, supervises insurers to judge whether they are being run in a safe and sound manner and whether they are protecting policyholders appropriately. Its approach to insurance supervision (July 2023) is plain about the limits: appropriate protection “does not mean protecting all policyholders in full in all circumstances, nor does it mean preventing all instances of failure”, and it does not seek to operate a “zero-failure regime”. Insurers “should be allowed to fail”, it adds, with the PRA working where possible for an orderly failure that keeps cover going, including by transfer to another firm, and the FSCS protecting eligible policyholders, subject to certain limits.

To check a firm, search its exact name on the FCA's Financial Services Register, a public record of firms that are, or have been, authorised by the FCA or the PRA. The register also lists firms the FCA has been told are providing regulated products or services without the correct authorisation, or deliberately running scams. Comparing insurers' quotes is covered in best annuity rates.

Annuity provider failure: questions people ask

Will my annuity payments stop if the insurer fails?

The PRA's rules are built to keep them going. While the FSCS seeks continuity, it must secure 100% of benefits as they fall due, paid as soon as reasonably practicable, subject to the conditions above.

Is there a cap on what the FSCS pays on an annuity?

For a long-term insurance contract, the PRA's rules set cover at 100% of the claim with no upper limit. The FSCS's own list adds a date condition: where the insurer failed before 3 July 2015, claims are 90% protected.

How would I find out if my insurer had failed?

The FSCS says that once an insurance firm becomes insolvent, policyholders usually find out from the insolvency practitioner appointed to sort out its affairs. Searching the insurer's name on the FSCS website leads to a dedicated page for that firm.

Your next step

Where an annuity is a qualifying contract with a PRA-regulated insurer, the FSCS is set up to protect it at 100%. Your provider is the place to ask what type of contract you hold, and Pension Wise remains free for questions about taking a defined contribution pension. If weighing that contract against your other income in retirement would help, an FCA-authorised adviser returns calls requested using this page's form, without charge to you.

Sources: FSCS (pensions; insurance; failed insurance companies), read 20 October 2026; PRA Rulebook, Policyholder Protection Part, rules 4.1 to 4.4, 5.1, 5.2, 5.4, Chapter 5A, 6.1 and 17.2; PRA, approach to insurance supervision (July 2023) and Bank of England, Supervision; Pension Protection Fund, Who we protect; FCA, Financial Services Register; MoneyHelper, Pension Wise (archived copy).