Almost a third of consumers will put more cash into their pension pots if they know it is protected by the Financial Services Compensation Scheme (FSCS), new research has revealed.
The research, carried out by Populus, found that of those with a pension 29% would invest, on average, a further £1,493 each year if they knew the money in their pension fund was fully protected by the FSCS.
FSCS protects customers' money when authorised financial services firms fail. It protects deposits up to £85,000 and offers assurance that customers will get their money back even when the firm with which they saved or invested it fails.
The findings show that 80% of the 2,000 Brits polled would feel “more reassured” by a pension provider that prominently communicates the fact that its products are FSCS protected. Two-thirds (66%) think that this information should be on their annual statement; more than a third (37%) would like to see their employer mention this; and 31% say the provider should highlight the FSCS protection on its website.
FSCS compensation limits will depend on how the pension funds are invested. For example, deposits in a bank, building society or credit unit will be protected up to £85,000 per person per firm. If you’re already drawing a set retirement income from an annuity or if building up a pension pot which is directly managed by a life insurer, then it will be 100% protected. For more information, visit Fscs.org.uk.
Unsurprisingly, the poll found that the most common reason why consumers don’t invest more into their pension pot was because they didn’t have any spare cash.
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Mark Neale, chief executive of the FSCS, says: “This research suggests that more prominent promotion of FSCS can have a similar impact in benefiting both consumers and providers in the pension sector. People will save more if they are confident their pension fund is safe and firms in turn will see reputational benefits if they prominently promote the available protection.
“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. Today’s research makes clear the benefits that doing this will have for everyone.”