Is your pension protected?

There has been a huge amount of bad news about pensions over the past few decades affecting both occupational and personal pensions. A litany of scandals have left a legacy of mistrust. The most notorious include:

• the Maxwell scandal where hundreds of millions of pounds were taken from employees pension funds;
• occupational pension^* schemes winding up with insufficient assets to honour the pension promises made to employees;
• Equitable Life which resulted in many policyholders being trapped in the insurance firm because the firm did not make provision for annuity^* promises made to customers;
• the huge pensions misselling scandal where huge numbers of people were persuaded by financial advisers and insurance companies to opt out of valuable occupational pension schemes into inferior personal pensions; and
• the chronic problem of high charging insurance company personal pensions which penalised people on low incomes most until the introduction of stakeholder pensions which forced charges down to more reasonable levels.

So it’s not surprising that confidence and trust has been affected. But these scandals should not put you off taking out a pension to provide for the future. It impossible to guarantee that scandals won’t happen again – there will still be risks involved with pension planning. But if you don’t save for retirement you will almost certainly end up with an impoverished old age.

Pension legislation and regulation

While there are no absolute guarantees in life, new legislation and regulation has been introduced over the years to try and minimise the risk of major scandals happening again. The important thing is that you should keep yourself informed about how your pension is doing, understand the risks you can face when you invest in pensions, and know what your rights are. 

There are separate legislative and regulatory regimes which govern occupational and personal type pensions.