Three-quarters of consumers are unaware that pensions products are protected by the Financial Services Compensation Scheme (FSCS), research has found.
A survey, conducted Ipsos MORI for the FSCS, found that just 26 per cent of people are aware that the lifeboat offers pension protection, while 68 per cent believe the protection is limited to just £5,000. Only 4 per cent were able to identify the correct level of protection.
As a result of the findings, FSCS said it will be establishing “best practice standards for pensions protection disclosure” to ensure consumers are “armed with right information.
The outgoing FSCS chief executive, Mark Neale, 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.”
Neale added that the FSCS is working with leading industry groups within the industry to ensure a “consistent approach” to delivering protection information to consumers.
“This working group, launched 18 months ago, will shortly publish guidelines on how life and pension product providers inform consumers about FSCS.”
Previous research by the lifeboat found that 29 per cent of people would invest more if they knew their pension fund was fully protected by the FSCS, on average as much as £1,493 each year.
In January, the compensation scheme set a £240m levy for pension providers over 2019/20, a £43m increase on the previous nine months.
Speaking in March, Neal said that pension freedoms is the biggest challenge facing the FSCS over the next decade, having paid £581m in the past five years, compared to £80m in the four years before it took effect.
Subscribe to our newsletter to receive breaking news by email.