All your annuity is now protected if company goes bust under new rules
July 9, 2015 by Money Mail Reporter
Savers who turn their nest eggs into incomes for life now have their entire payout covered if the firm offering the deal goes bust.
By contrast, those who keep their savings invested and draw an income from it only have £50,000 protected – in many cases this is much less than they have put away.
Previously, those who took incomes for life, known as annuities, would have only 90 per cent of the pension covered – if the company ran into trouble – by the Government’s Financial Services Compensation Scheme.
However, last week the Government increased this to 100 percent payout. Critics argue that drawdown also needs 100 percent protection.
The number of savers who take out an annuity has plunged because new pension freedoms allow savers to cash in their pots.
By contrast the number of savers keeping their money invested and taking an income from it has shot up. The average pension pot in drawdown last year was £66,000. But many savers have more.
Richard Lloyd, of consumer group Which?, says: ‘People save hard for retirement. Regulators must keep up with reforms and increase coverage for drawdown products, too.’
