December 22, 2016 | 3years | Retirement Planning News
Financial Conduct Authority to review safeguards against risk of financial firms going bust as pensioners favour drawdown products to annuities
The maximum compensation someone can receive if an investment company goes bust could be increased from its current £50,000 to as much as £1m, the UK’s main financial watchdog has suggested.
The Financial Conduct Authority (FCA) said a rethink of the official compensation scheme relating to financial firms may be needed following the new freedoms on pensions introduced in 2015.
These have seen many older people turn their backs on annuities – products that provide a retirement income for life – in favour of investment products such as income drawdown.
Currently, if an annuity firm fails the saver will receive compensation of 100% of their loss however much it is, but protection on income drawdown is capped at £50,000.
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