With this type of pension, you build up a pension pot to pay you a retirement income. It’s based on how much you and/or your employer contribute and how much this grows.
It’s also known as a ‘money-purchase scheme’, and includes workplace and personal pensions.
This type of scheme isn’t covered by the Pension Protection Fund. But there are several layers that help to keep your money as safe as possible.
Firstly, all registered pension schemes in the UK will be regulated by either the Financial Conduct Authority (FCA) or The Pensions Regulator (TPR).
These are both independent bodies which aim to protect members, reducing the possibility of things going wrong.
These organisations set out the rules under which pension schemes must operate and how they must manage the investments of pension plans.
To protect investors’ money, there are strict rules that govern the financial strength of companies, as well as the systems and controls they must have in place to protect your investments.
These organisations have many powers, including the ability to inspect the operations and risk controls your pension providers have in place. Providers have to report regularly on their financial strength.