WEBVTT - How to Diversify Your UK Pension Pot 0:00:03.160 --> 0:00:19.520 Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Merrin Talks 0:00:19.560 --> 0:00:22.040 Your Money, the personal finance edition of Marin Talks Money. 0:00:22.200 --> 0:00:24.759 In these bonus podcasts, we talk about the best strategies 0:00:24.760 --> 0:00:27.440 for making the most of your money. I'm Maren thumsat 0:00:27.480 --> 0:00:29.520 Web and with Me Senior, a border and money Distilled 0:00:29.520 --> 0:00:33.360 author John Stapback. Hi. Hi, right, So this week we 0:00:33.400 --> 0:00:35.080 are answering a question from Mike. 0:00:35.440 --> 0:00:38.240 I'd love to know your thoughts on the possible risks 0:00:38.280 --> 0:00:41.760 in having all of your DC pension invested in one fund, 0:00:41.880 --> 0:00:45.680 such as, for example, the Vanguard Life Strategy Fund, given 0:00:45.720 --> 0:00:50.080 that the FSCs limits are only eighty five thousand. I've 0:00:50.159 --> 0:00:52.559 kind of thought about this as my pension pot has increased. 0:00:52.560 --> 0:00:55.720 I've wondered if it should be spread around a number 0:00:55.720 --> 0:00:58.360 of similar passive funds from different providers. 0:00:58.800 --> 0:01:01.000 Gosh, well, there's quite a lot in here because it's 0:01:01.040 --> 0:01:03.600 not really about one fund, but it's about one provider, 0:01:03.760 --> 0:01:04.040 isn't it. 0:01:04.080 --> 0:01:08.720 Jump Well, the FSCs is basically where do you go 0:01:08.800 --> 0:01:14.800 if all the else fails and so, say you're broker 0:01:15.400 --> 0:01:18.160 goes bust, Say the platform that you're on goes bust, 0:01:18.920 --> 0:01:21.080 and then not only that it terms out, it goes 0:01:21.120 --> 0:01:24.240 bust and your money isn't where it should be. Because 0:01:24.280 --> 0:01:27.880 the key thing if you're using a platform like how 0:01:27.959 --> 0:01:31.679 gas lines down or an interactive investor for example, then 0:01:31.880 --> 0:01:35.480 your assets should be separated so that even if the 0:01:35.480 --> 0:01:39.800 platform provided breaks down, then your money is there somewhere 0:01:40.800 --> 0:01:42.280 and then it's just a matter of trees there. 0:01:42.360 --> 0:01:45.440 Yeah, I mean that's absolutely key. So everything that you 0:01:45.520 --> 0:01:48.080 hold in an ISA or a pension or anything like 0:01:48.160 --> 0:01:51.000 that is effectively held in a kind of trust structure 0:01:51.120 --> 0:01:54.320 for you. So whatever goes wrong at the broker, that 0:01:54.480 --> 0:01:58.280 structure still exists and your money is still inside it. 0:01:58.640 --> 0:02:01.280 So you only run into a problem where you might 0:02:01.400 --> 0:02:06.080 need back up from the FCFC if there's some kind 0:02:06.120 --> 0:02:09.200 of fraud involved or your money has been moved out 0:02:09.240 --> 0:02:12.280 of these these trust structures into something else. Right, So 0:02:12.320 --> 0:02:17.400 it's it's incredibly unlikely unlikely that if you're broke a 0:02:17.480 --> 0:02:19.600 where to go bust, which does happen, if you're broke 0:02:19.639 --> 0:02:22.040 away to go bust, you might need recourse to them. 0:02:22.360 --> 0:02:22.839 Is that fair? 0:02:23.400 --> 0:02:26.320 Yeah, it is unlikely. I mean it's obviously it would 0:02:26.360 --> 0:02:28.480 be a hassle in a nightmare if your broker goes bus, 0:02:28.600 --> 0:02:31.960 then brokers do go bust, smaller brokers. You know, over 0:02:32.000 --> 0:02:35.520 the years writing about this stuff, you know, there's always 0:02:35.960 --> 0:02:38.120 every kind of like three or four years is usually 0:02:38.120 --> 0:02:41.200 a story about some broker that most people probably haven't 0:02:41.200 --> 0:02:45.520 heard of, and often what happens. One of the problems 0:02:45.639 --> 0:02:49.680 is that even if there isn't actual fraud, and sometimes 0:02:49.760 --> 0:02:52.800 it is fraud, but if there isn't freud, there's sometimes 0:02:52.840 --> 0:02:57.680 just really sloppy paperwork, and you know, the people who 0:02:57.720 --> 0:03:00.440 have got to go to the FSCs and having to 0:03:00.480 --> 0:03:03.520 wait for ages. That's broadly speaking, what this is for. 0:03:04.160 --> 0:03:06.480 And really, I do think that this is a really 0:03:06.520 --> 0:03:08.840 good question, because it's not like this is a similar 0:03:08.840 --> 0:03:11.639 thing with bank accounts. So we all remember the financial 0:03:11.720 --> 0:03:15.080 crisis and how everyone actually got clued up on the 0:03:15.160 --> 0:03:19.000 FSCs very quickly after that, and we all know that 0:03:19.040 --> 0:03:21.480 you shouldn't hold more than eighty five thousand pounds with 0:03:21.600 --> 0:03:26.600 any one bank sort of like banking group, per person, 0:03:26.720 --> 0:03:29.000 because if your bank did end up having a run 0:03:29.040 --> 0:03:31.359 on it and there was another two thousand and eight situation, 0:03:31.840 --> 0:03:34.160 then you're only covered up to the eighty five thousand, 0:03:34.600 --> 0:03:37.600 excepting certain minimal circumstances. 0:03:37.640 --> 0:03:39.200 And something to say there by the way, is that 0:03:39.200 --> 0:03:41.480 if you have cash, right, if you have cash at Hugger's, 0:03:41.520 --> 0:03:43.640 lamsown or one of the other broadkers, in one of 0:03:43.640 --> 0:03:46.560 those active saving schemes, whatever it is, that money is 0:03:46.680 --> 0:03:49.280 likely to be spread across different banks as well. And 0:03:49.320 --> 0:03:51.240 it's eighty five thousand for each of those. 0:03:51.840 --> 0:03:55.120 Yeah, and that's both checking. If you're worried about it, 0:03:55.160 --> 0:03:58.440 then you should check with your platform exactly how it 0:03:58.440 --> 0:04:00.720 does that. And most of the you know, the platforms 0:04:00.760 --> 0:04:03.040 will explain that to you. The price should be something 0:04:03.080 --> 0:04:05.680 on their website, but if you can't find it, then 0:04:05.760 --> 0:04:07.600 just email and ask them about it. 0:04:08.080 --> 0:04:09.880 Well, here, listen, I'll read you the bit from huggris 0:04:09.960 --> 0:04:12.800 lansdown website. Money you having an Isora funder a share 0:04:12.840 --> 0:04:15.520 account is held in legally separate trust accounts across the range. 0:04:15.520 --> 0:04:17.520 If you get regulated banks, this means your cash you're 0:04:17.520 --> 0:04:20.719 held separately to Hl's cash and it is reconciled daily. 0:04:21.400 --> 0:04:23.080 So that's the basics. 0:04:22.600 --> 0:04:25.359 That a reputable platform will keep it an eye on 0:04:25.480 --> 0:04:27.719 all this stuff. This is something you really do have 0:04:27.760 --> 0:04:29.920 to consider if you're someone who does have more than 0:04:29.960 --> 0:04:32.520 eighty five thousand pounds, and frankly, if you have a 0:04:32.560 --> 0:04:35.640 pension that's going to be worth that's going to fund 0:04:35.880 --> 0:04:39.560 you in retirement, then you probably will have a pension 0:04:39.680 --> 0:04:43.320 that's worth more than eighty five thousand pounds. And although 0:04:43.760 --> 0:04:47.000 things like brokers going bust doesn't happen very often, this 0:04:47.080 --> 0:04:48.680 is one good reason why you do need to keep 0:04:48.680 --> 0:04:53.599 an eye on the you know, the solvency of your broker, 0:04:54.080 --> 0:04:56.919 and the easiest way to do that is to use 0:04:57.240 --> 0:05:00.640 one of the big ones for at least art of 0:05:00.920 --> 0:05:03.520 your pension pot, even if you've got a broker that 0:05:03.560 --> 0:05:06.680 you prefer that's you know, smaller or more obscure or 0:05:06.760 --> 0:05:10.919 cheaper or whatever. Because one of the important things with 0:05:11.040 --> 0:05:16.040 this kind of situation is how politically sensitive it is. 0:05:16.800 --> 0:05:19.880 And if you can sit there and say, this company 0:05:19.920 --> 0:05:23.240 that I am invested with, would it going bust be 0:05:23.320 --> 0:05:27.400 a front page headline scandal story, I think answers yes, 0:05:27.520 --> 0:05:30.080 then that's actually an extra layer of protection for you 0:05:30.520 --> 0:05:36.400 because politicians will react if that happens, Whereas if it's 0:05:36.480 --> 0:05:41.200 just some pidly wee relatively recent startup that nobody else 0:05:41.240 --> 0:05:43.520 knows about, then you are going to be on your 0:05:43.560 --> 0:05:47.880 own as far as you know, getting your money back 0:05:47.960 --> 0:05:51.520 goes beyond the connective SCS limits. So I think that's 0:05:51.600 --> 0:05:54.640 that's a really important element to think about if you 0:05:54.680 --> 0:05:57.920 are someone who's in the situation of, you know, being 0:05:57.960 --> 0:05:58.839 able to think about this. 0:05:59.520 --> 0:06:02.039 Of course, that's not what startup brokers want to hear, 0:06:02.120 --> 0:06:04.800 is it that there are these these massive motes around 0:06:04.839 --> 0:06:07.359 the big guys for that very reason? But I agree 0:06:07.360 --> 0:06:09.440 with you, you know, it's one of the reasons to have 0:06:09.480 --> 0:06:12.840 a big name broke up. Interestingly, though, I still have 0:06:13.000 --> 0:06:15.720 my assets spread across three different organizations. 0:06:15.920 --> 0:06:18.320 I think that's sensible for actually. 0:06:18.000 --> 0:06:21.000 Come to think of it, simply simply because of admin. God, 0:06:21.040 --> 0:06:24.280 I hate admin. I hate admin, and I can't imagine 0:06:24.440 --> 0:06:27.720 having all my assets held on one platform it going 0:06:27.800 --> 0:06:30.760 bust and then two years of admin and form filling 0:06:30.800 --> 0:06:32.520 and all that. I don't think I could stand it. 0:06:32.720 --> 0:06:35.039 Oh the way they'd be hairlish, and it's like, it's 0:06:35.080 --> 0:06:37.440 just there's different levels of here. There's there's a level 0:06:37.440 --> 0:06:38.960 of hell where you have to eat two years for 0:06:39.000 --> 0:06:41.240 your ices, and there's a level of hell we are 0:06:41.320 --> 0:06:44.000 your ices actually weren't near anymore. 0:06:44.160 --> 0:06:46.599 That's the worst layer of hell. I don't think any 0:06:46.640 --> 0:06:49.000 of the organizations I'm with would get me into that situation. 0:06:49.040 --> 0:06:51.360 But you know, who knows, never say never, Terrible things 0:06:51.360 --> 0:06:52.720 happen out there in the world of money. 0:06:52.760 --> 0:06:55.360 We know that, no, absolutely, And I think I think 0:06:55.360 --> 0:06:58.760 the other point, I mean, the answer makes questions specifically, 0:06:59.520 --> 0:07:03.720 actually question he's asking a little bit easier to my mind, 0:07:03.760 --> 0:07:06.520 because really what he's talking about is having it all 0:07:06.520 --> 0:07:10.880 in one fund. And don't get wrong, I mean, Vanguard 0:07:10.920 --> 0:07:16.120 falls very squarely into the headline, you know, political protections, 0:07:16.240 --> 0:07:18.520 kind of like a company if that went, but then 0:07:18.880 --> 0:07:22.400 that would definitely be a front page story. But you know, 0:07:22.560 --> 0:07:24.880 it's very easy. He just put some of your money 0:07:24.920 --> 0:07:29.960 into a different passive fund that is doing basically the 0:07:30.040 --> 0:07:34.800 same thing. That's a fairly low ADMIN solution. I can 0:07:34.840 --> 0:07:36.840 see why you might not want to have more than 0:07:37.560 --> 0:07:41.480 one pension platform if you're only you know, if you're 0:07:41.520 --> 0:07:43.920 only just over the limit and you're like, oh god, 0:07:43.960 --> 0:07:45.920 I hate the ADMIN and I don't want to move 0:07:45.960 --> 0:07:47.320 money to you, and I don't want to do this. 0:07:47.520 --> 0:07:50.320 But with that, that's just a pretty straightforward matter of 0:07:50.880 --> 0:07:54.040 taking a chunk of your pension money and putting it 0:07:54.080 --> 0:07:55.920 in a slightly different index fund. 0:07:56.240 --> 0:07:57.800 I mean, I just think, I mean, I would never 0:07:58.000 --> 0:08:01.520 just rely on one fund for everything. I mean Vangguard 0:08:01.920 --> 0:08:04.840 Life Strategy Fund. I mean, this is a well established strategy, 0:08:04.920 --> 0:08:06.960 is a well established company. But why would you put 0:08:07.000 --> 0:08:10.920 everything into one thing? Ever? Ever, I mean, I don't 0:08:10.920 --> 0:08:13.600 think that the Vang Life Strategy Fund is going to 0:08:13.720 --> 0:08:16.520 end up being wound down. I don't think it's going 0:08:16.560 --> 0:08:18.760 to not have enough assets in it to be viable. 0:08:18.880 --> 0:08:20.520 You know, none of those things are likely to happen. 0:08:20.600 --> 0:08:23.720 But again, why not just have a couple of different things? 0:08:24.000 --> 0:08:27.040 Yeah, I think this is one of those questions a 0:08:27.200 --> 0:08:29.440 very basic level, just don't have all your eggs and 0:08:29.520 --> 0:08:32.360 one basket. Also, the more eggs you've got, the more 0:08:32.440 --> 0:08:34.720 baskets should going to required if you want to be 0:08:34.760 --> 0:08:36.240 able to sleep socadly and. 0:08:36.200 --> 0:08:39.800 Obviously, I mean you can take eggs baskets, how many 0:08:40.520 --> 0:08:42.800 As you get more eggs, you need more baskets. Is 0:08:42.840 --> 0:08:46.319 that that's what you're saying, Yes, diversify, have a couple 0:08:46.320 --> 0:08:48.120 of baskets, move the eggs around them. 0:08:48.240 --> 0:08:51.560 I think it's possible. Probably overly neurotic about this, but 0:08:51.800 --> 0:08:55.120 the deeper you want to go into it, I have 0:08:55.240 --> 0:08:58.360 to see I'm not you know, low with as I 0:08:58.400 --> 0:09:02.320 am to mention the competition. The money Vator blog is 0:09:02.440 --> 0:09:04.600 very good on this stuff for people who want to 0:09:04.640 --> 0:09:08.920 go deep down into you know, exactly which kinds of 0:09:08.920 --> 0:09:13.240 funds are protected and all that sort of stuff. As 0:09:13.240 --> 0:09:16.680 I say, I think you can probably it would probably 0:09:16.720 --> 0:09:18.960 be easy to get a bit too you not to 0:09:18.960 --> 0:09:21.079 give about this, but at the same time it's definitely 0:09:21.120 --> 0:09:24.040 something you should think about, certainly, especially if you are 0:09:24.120 --> 0:09:28.520 going with small, more vulnerable providers, then you should be 0:09:28.600 --> 0:09:31.160 paying more attention to this stuff. You know, if you 0:09:31.200 --> 0:09:34.160 do have all your money we big brand names that 0:09:34.280 --> 0:09:37.280 have got that, you know, headline protection, then you can 0:09:37.320 --> 0:09:40.120 probably be a bit more relaxed about it. But if 0:09:40.160 --> 0:09:42.320 it's anything off piecet, then just make sure you know 0:09:42.360 --> 0:09:43.160 what you're doing. 0:09:43.400 --> 0:09:45.240 And just be clear that you know you can not 0:09:45.760 --> 0:09:48.960 this PARTICULARTF. But other atfs, they do get delisted, they 0:09:49.000 --> 0:09:50.880 do get wound down, and then you do wait for 0:09:50.920 --> 0:09:52.440 a bit of your money to come back, but it 0:09:52.440 --> 0:09:55.480 does come back. And it's the same with investment trusts 0:09:55.480 --> 0:09:57.360 for example. Every now and then they get wound down, 0:09:57.400 --> 0:09:58.960 right and then the money will the money will turn 0:09:59.040 --> 0:10:00.800 up in your bank account of it actually, and the 0:10:00.840 --> 0:10:03.440 same with other types of funds. Okay, but one thing 0:10:03.480 --> 0:10:05.080 to add to that, John, and I think you know 0:10:05.080 --> 0:10:08.480 about this is that you do not get FSCs protection 0:10:08.640 --> 0:10:11.560 anyway from investment trusts and ETFs. Is that right? 0:10:12.040 --> 0:10:15.760 Yeah? I mean that's moving in your or ticktatorory. If 0:10:15.760 --> 0:10:17.040 you're bordering a bit of that too much. 0:10:18.320 --> 0:10:20.520 All right, well we'll leave it there. But the word 0:10:20.679 --> 0:10:22.439 last thing I wanted to mention is just to be 0:10:22.559 --> 0:10:25.839 absolutely clear, you will not get any compensation from the 0:10:26.200 --> 0:10:29.040 FSCs or indeed from anybody else if you just make 0:10:29.080 --> 0:10:31.520 a bad choice, if you choose a terrible fund and 0:10:31.600 --> 0:10:34.120 it falls ninety percent, I'm afraid that's on you. Bad 0:10:34.240 --> 0:10:37.520 choices have consequences, so let's try not to make too 0:10:37.840 --> 0:10:50.120 many of those. Thanks for listening to this week's meren 0:10:50.160 --> 0:10:52.280 Talk to Your Money. If you like us, share, rate, review, 0:10:52.360 --> 0:10:54.640 and subscribe wherever you listen to podcasts. Also, be sure 0:10:54.679 --> 0:10:56.719 to follow me in John on x or Twitter at 0:10:56.800 --> 0:11:01.760 marinusw and John Underscore Stepic. This episode was produced by Semasadi, 0:11:01.840 --> 0:11:05.000 Production support and sound designed by Moses and Questions and 0:11:05.000 --> 0:11:07.800 comments on this show and all our shows are always 0:11:07.880 --> 0:11:11.280 welcome our show. Email is Marimony at bloomberg dot net.