Financial Services Compensation Scheme
If we get into financial difficulties which may affect our ability to pay your claim, you may be eligible to receive compensation under the FSCS.
The FSCS is an independent body set up by the UK Government to provide compensation or some other form of resolution for people where their authorised financial services provider gets into financial difficulties and becomes unable, or unlikely to be able, to pay any claims. This circumstance is widely referred to as being 'in default'.
It is important for you to be aware that you may not always be able to make a claim under the FSCS, and there are also limitations in the amount of compensation you may receive.
Any compensation available will depend on your eligibility, the type of financial product or service involved, the investment funds selected (if applicable) and the circumstances of the claim.
Is Prudential covered by the Financial Services Compensation Scheme (FSCS)?
Yes. The Prudential Assurance Company Limited (PACL) and other UK authorised and regulated firms in the Prudential Group are subject to the FSCS. You may be able to make a claim if Prudential is unable to meet its financial obligations.
Is Prudential International Assurance Company covered by the Financial Services Compensation Scheme?
Prudential International Assurance (PIA) is authorised by the Central Bank of Ireland and is subject to limited regulation by the Financial Conduct Authority for UK Business.
For eligible policyholders (e.g. individuals or small firms) habitually resident in the UK the FSCS would apply for policies taken out on or after 1 December 2001.
Policyholders holding a UK policy, issued before 2001, may be eligible to make a claim before the FSCS, however, since such a policy would have been taken out before the FSCS regime commenced, they should check their eligibility directly with the FSCS.
Are there limits to the compensation payable by the FSCS?
Yes. The FSCS operates different levels of compensation. The scope and amount of cover available depends on the type of policy involved and the funds selected. The normal limits in terms of products are as follows.
Please ensure that you also read 'Important information about funds and FSCS protection' as the limits below will not apply in all cases.
Long-term insurance (e.g. workplace pensions, personal pensions, annuities, endowments and investment bonds)
- 100% of the claim with no upper limit for the claim amount.
Investments (e.g. Unit Trusts, Open Ended Investment Companies and Stocks & Shares ISAs)
- 100% but limited to £50,000 per person, per firm in default.
Home Finance (e.g. Mortgage advice and arranging only ) .
- 100% but limited to £50,000 per person, per firm in default.
General insurance policies
- 90% of a claim with no upper limit.
- Compulsory insurance, such as car insurance, for policies started on or after 14 January 2005, is fully covered with no upper limit.
- The FSCS would pay compensation up to the limit of £85,000 per person, per authorised deposit Group (bank, building society and credit unions). Since 3 July 2015, the FSCS provides a £1 million protection limit for temporary high balances held with your bank, building society or credit union if it fails.
Self-Invested Personal Pensions
A Self-Invested Personal Pension (SIPP) is a type of 'wrapper' for a mixture of different financial products. These products can include insurance, investments or deposits. SIPPs can be provided directly by a SIPP manager or by fund managers, banks, building societies or insurance companies.
Prudential's earlier Self-Invested Personal Pensions, including Flexible Retirement Plan, offer self-investment through reinsurance agreements with other SIPP managers. The FSCS does not provide protection for any losses resulting from default of these SIPP managers because of these reinsurance agreements, although Prudential closely governs these relationships. These products do offer external and/or internal funds. Money invested in our internal funds is fully covered by the FSCS under the category of 'long term insurance'.
Money invested into external funds is not covered by the FSCS, although external fund managers may appoint a depository and a custodian, the purposes of which are to help ring-fence invested money from that of the fund manager and so help protect the invested money in the event the fund manager is insolvent. Although the trustees, Prudential Corporate Pensions Trustees Limited (PCPTL), aim to recover any money invested, PACL would not be liable for a default of the external fund manager.
For our latest SIPP – Retirement Account - PACL is the SIPP manager whilst PCPTL legally owns the assets in the Retirement Account, and holds those assets for the benefit of the customer. The result being that each 'sub-element' of the SIPP (e.g. OEICs, Life Funds, Cash Account) is subject to its own FSCS protection up to the relevant product limits. It's important to be aware that PACL would not be liable for a default of any external sub-elements within the SIPP, although PCPTL would look to recover any invested money.
I have an individual personal pension/savings product – what FSCS protection do I have for the funds I've chosen?
Different products offer different investment options – internal funds or external funds. Investment in Prudential's internal funds are fully protected by the FSCS in the event of a default of PACL, up to the product limits.
Investment into external funds is not protected under the FSCS, although external fund managers may appoint a depository and a custodian, the purposes of which are to help ring-fence invested money from that of the fund manager and so help protect the invested money in the event the fund manager is insolvent. Although we aim to recover any money invested, PACL would not be liable for a default of the external fund manager.
Also, unit prices may fluctuate in line with the value of the assets owned by the fund, but this is normal investment risk and not protected by the FSCS.
I am a member of a workplace pension – what FSCS protection do I have for the funds I've chosen?
Different workplace pensions products offer different investment options – how they are managed can have a bearing on the level of FSCS protection. Funds managed directly by Prudential Assurance Company Ltd (PACL) are fully protected by the FSCS in the event of a default. Typical examples of funds managed by PACL are the With-profits and Deposit funds.
The majority of our workplace pension funds however are available from Prudential Pensions Limited (PPL). In this case PPL is a corporate investor (investing money on Prudential's behalf) and as such is not entitled to FSCS protection. If you invest in a PPL fund as a policy holder, you would not be protected by the FSCS for any loss arising as a result of a default of PPL, or an underlying fund management company PPL invests with.
PACL conduct robust on-going monitoring of all internal funds and the external fund managers we invest with. This aims to ensure the integrity of the funds, the security of the assets managed on our behalf and that an agreed investment approach is followed. This allows us to anticipate any events that may cause solvency issues to ensure they can be addressed appropriately.
Although FSCS protection does not apply to PPL funds there are other forms of customer protection in the event of default. External fund managers may have a depository and custodian in place to help ring-fence invested money from that of the fund manager providing protection in the event of the manager being insolvent. Although PACL would aim to recover any money invested, it would not be liable for a default of the external fund manager.
To find out more about the funds you have invested in, please contact us or speak to your scheme administrator.
More information about our funds and FSCS protection
Internal insured funds
If you invest in our internal funds as a policyholder you are buying units in these funds. If PACL is deemed to be in default your investment is protected by the FSCS as long-term insurance.
However, if you invest internal funds available through Prudential Pensions Limited (PPL) through our workplace pensions, this would not be covered under the FSCS.
If you choose to invest in an external fund offered through PACL, here Prudential buys shares in funds provided by other fund managers (including fund managers within the Prudential Group of companies). You would not be protected by the FSCS should that other fund manager or company be deemed to be in default.
Role of Custodians and ring fencing for external funds
Any money invested in an external fund is kept separate from the assets of the actual company that manages the fund. External fund managers may appoint a depository and a custodian, the purposes of which are to help ring-fence invested money from that of the fund manager and thus help protect the invested money in the event the fund manager is insolvent. If the company that manages the fund goes into default, the Custodian in this instance would disinvest the fund and return any monies.
Since your money is kept separate from the assets of an external fund manager, the only likely reason for an external fund defaulting, would be as a result of dishonesty, fraud or negligence. However, it is important to remember that investment into external funds is not protected under the FSCS and although we would aim to recover any money invested, PACL would not be liable for any shortfall following a default of external fund managers.
Prudential also has reinsurance agreements with other companies or fund managers to allow our customers access to their funds. Here the external fund manager invests our customers' money together with their own customers' money and that of companies similar to PACL. You would not be protected by the FSCS should this external fund manager or company be deemed as being in default. Although we would aim to recover any money invested, PACL would not be liable for a default of the reinsurer. This includes investment into PPL for our workplace pensions.
More information about the FSCS.
The Financial Services Compensation Scheme
PO Box 300
Or call the FSCS: Telephone: 0800 678 1100
This is based on our understanding of the FSCS as at April 2017
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