How much to have in a SIPP

[BenValue]

Is it unwise to have more than £85,000 with a SIPP provider? Presumably only the first £85,000 is protected if the SIPP provider goes under.

[Alaric]

Presumably only the first £85,000 is protected if the SIPP provider goes under.

That's only true if it's all on deposit with one bank.

Assets are ring fenced from the accounts of the SIPP provider, so under most circumstances are 100% retrievable. The same applies to ISAs and for that matter dealing accounts.

What can go wrong is that the records are in such a mess that it's impossible to establish who is the beneficial owner of what. Also the liquidator may be able to dip their hands in the pot to meet their fees. In a recent case (Beaufort) it was eventually agreed that the FSCS would meet most or all of the liquidator fees.

[goRt]

Presumably only the first £85,000 is protected if the SIPP provider goes under.

That's only true if it's all on deposit with one bank.

Assets are ring fenced from the accounts of the SIPP provider, so under most circumstances are 100% retrievable. The same applies to ISAs and for that matter dealing accounts.

What can go wrong is that the records are in such a mess that it's impossible to establish who is the beneficial owner of what. Also the liquidator may be able to dip their hands in the pot to meet their fees. In a recent case (Beaufort) it was eventually agreed that the FSCS would meet most or all of the liquidator fees.

I think it's worse than that as most (?all?) operate a pooled client account set up where there appears to be one lot of 85k protection across the whole of the cash holdings of all clients.
ii used to operate named client accounts across 12 banking institutions, but quietly dropped that, as part of my wide-ranging complaint it was compelled to email 400k clients warning of the change (although it's subsequently stated in a secure message that it spreads the risk in direct conflict with its documented policy and the email!)

[mc2fool]

I think it's worse than that as most (?all?) operate a pooled client account set up where there appears to be one lot of 85k protection across the whole of the cash holdings of all clients.

No, it should be spread amongst at least five deposit taking institutions and you get up to £85K protection with each, subject to your other deposits with each institution.

See my recent exchange with IWeb on exactly this matter; read all of my posts in the thread to get the full exchange as there's a bit of back-and-forth: viewtopic.php?f=26&t=13044

[goRt]

I think it's worse than that as most (?all?) operate a pooled client account set up where there appears to be one lot of 85k protection across the whole of the cash holdings of all clients.

No, it should be spread amongst at least five deposit taking institutions and you get up to £85K protection with each, subject to your other deposits with each institution.

See my recent exchange with IWeb on exactly this matter; read all of my posts in the thread to get the full exchange as there's a bit of back-and-forth: viewtopic.php?f=26&t=13044

*should* and is - ii pooling complies with the very vague FCA requirements because it tells you.

I'm pleased I'm not the only one who reads the detailed terms on where we hold our money

[JohnB]

@BenValue you need to distinguish between cash held in a SIPP and investments. Its 100% of £85k for cash, but for investments its 100% of the first £30,000 and 90% of the next £20,000 up to £48,000 per person per firm.

As others have said investments are ringfenced, but that might not stop gross fraud rather than mere incompetence.

Most people accept the small risk rather than have lots of SIPPs each charging £100-200 p/a in fees, but it would be wise to have your ISAs elsewhere.

[mc2fool]

*should* and is - ii pooling complies with the very vague FCA requirements because it tells you.

Link please.

...for investments its 100% of the first £30,000 and 90% of the next £20,000 up to £48,000 per person per firm.

No, it's just plain £50K. You're 9 years and 21 days out of date. https://www.fscs.org.uk/what-we-cover/

[JohnB]

Bother, I swiped the text from the same page but mis-read the flags

[BenValue]

Many thanks for the replies

[goRt]

*should* and is - ii pooling complies with the very vague FCA requirements because it tells you.

Link please.

Banking arrangements: https://media-prod.ii.co.uk/s3fs-public ... pp_kfd.pdf

[Alaric]

Banking arrangements

For details on how cash and assets are protected by the FSCS once they are held in the SIPP Investment
Account please refer to the SIPP Investment Terms of Service or to IISL’s website for further details. The level
of compensation may be subject to change from time to time. You should note that the eligibility of each
claim will be assessed on a case-by-case basis.

The KFD doesn't really tell you.The SIPP Investment Terms of Service may be the necessary document.

https://media-prod.ii.co.uk/s3fs-public ... ervice.pdf

although that doesn't say very much about limits either.

This one seems to be it

https://media-prod.ii.co.uk/s3fs-public ... xypNwhiWsD

Compensation in the event of default by a third-party financial institution
The cash you hold with us is pooled with that of other customers and deposited with a number of financial
institutions. In the event of the failure of one of these institutions, you may be able to make a compensation
claim through the relevant deposit guarantee scheme. In the UK, the relevant deposit guarantee scheme is
the FSCS and deposits are protected up to a value of £85,000 per person, per institution. In the interests of
diversifying risk, we may deposit a proportion of the pooled money in a country outside the UK, where we
cannot guarantee that it will be protected by a similar deposit guarantee scheme to the FSCS.

[mc2fool]

The KFD doesn't really tell you.
:
This one seems to be it

https://media-prod.ii.co.uk/s3fs-public ... xypNwhiWsD

Indeed. That and https://www.ii.co.uk/about-ii/your-protection both confirm my understanding, as per my discussion with IWeb, that client funds are spread around several banks and you get up to £85K of FSCS protection for each one (subject to your other deposits with each bank).

Any money (cash) held in your account is treated as ‘client money’ as defined by the FCA. This means your money is held separately from the firm’s own corporate funds, in bank accounts specially designated as holding client money.
:
...we diversify the money we hold to ensure that clients’ money is not exposed to a single bank, and we only place money with institutions which are covered by the UK FSCS deposit protection scheme, or by a similar European scheme.

In the event one of these banks were to fail you would be able to make a compensation claim through the relevant deposit protection scheme. For deposits held in the UK this is the FSCS deposit protection scheme and the current compensation limit is £85,000.

[onslow]

"you would be able to make a compensation claim through the relevant deposit protection scheme"

How nice of them to say so. I'd be going after them first rather than the underlying banking institution.

They cant absolve themselves as easily as that.

(yes I'm aware if one of the big banks did go under and this was a real issue we'd probably have more important things to worry about!)

[ursaminortaur]

"you would be able to make a compensation claim through the relevant deposit protection scheme"

How nice of them to say so. I'd be going after them first rather than the underlying banking institution.

They cant absolve themselves as easily as that.

(yes I'm aware if one of the big banks did go under and this was a real issue we'd probably have more important things to worry about!)

If the potential loss was purely because one or more of the banks they used went bust then what grounds would you have to go after them first ?

[onslow]

Because I'm depositing money with the pension provider/SIPP provider, not the underlying bank.

[goRt]

Because I'm depositing money with the pension provider/SIPP provider, not the underlying bank.

But they're telling you (in not very clear terms) what you are getting for your money

[onslow]

They are saying they use a bank/banks to deposit the money. Not exactly a surprise...

All well and good, however my contract is with them, not whatever bank they choose to use.

Lets also not forget very few broker accounts pay interest on cash balances....yet the brokers themselves get interest from the banks....what would happen if they move the money to a higher risk bank to earn themselves higher rates of interest? it'll go straight to their bottom line. All well and good, however if that bank went broke they would then turn around and say "oh yes sorry we've lost your funds....go take it up with the bank"

Really? You may accept that, myself and I know quite a few others wouldn't. The broker cannot absolve themselves of responsibility.

[Alaric]

Lets also not forget very few broker accounts pay interest on cash balances....yet the brokers themselves get interest from the banks

It suggests that if cash is being held in a SIPP as an investment decision, as opposed to a short term transaction, that it may be better to hold a proxy, such as a Gilt or an ETF. That puts it outside of the Broker.

[Ma1co1m]

BenValue
Are you talking about having £85k in cash with the SIPP provider, or having investments worth over that amount with them ? The two cases are entirely different and that might not be obvious from the replies you have had
ma1co1m