For adviser use only – not approved for use with clients
Investor protection through
Aegon Retirement Choices
and One Retirement
This guide outlines how we protect your clients’
money and, should the worst happen, illustrates
the level of protection your client can expect to
receive through Aegon Retirement Choices (ARC)
and One Retirement.
Contents:
As easy as one, two, three
3
Protection at a glance
4
Aegon’s responsibilities
6
Investment providers’ responsibilities
7
FSCS responsibilities
7
Who can claim?
8
FSCS limits
9
Page 2 of 11
As easy as one, two, three
Whether your client invests through ARC or One Retirement they’ll receive
three levels of protection.
Protection level
How it works
Aegon – level 1
Aegon has a responsibility to clients to manage their assets
responsibly. This is why we separate clients’ assets from our own.
This makes sure that in the event of us defaulting, all or most client
assets are still owned by the client, so can’t be used to settle creditor
claims. Doing this protects the assets for the client.
Exceptions to this could be if investments are trading within an
institutional share class, or if re-insurance on investments has taken place.
Investment providers
– level 2
There are various regulatory measures in place that most investment
providers must follow to operate within the UK. These measures
are aimed at helping to protect investors’ assets. Examples of these
measures are the regulatory liabilities for OEICs (Open-ended
investment companies) to:
• separate clients’ assets from the manager’s own assets; and
• make sure the structure and management of the funds are in line
with the Financial Conduct Authority (FCA) guidelines.
These guidelines are in place to make sure the assets are protected
from misuse, or the firm defaulting.
Financial Services
Compensation Scheme
– level 3
The FSCS (Financial Services Compensation Scheme) protects
investors’ assets by funding certain shortfalls if a company is unable,
or likely to be unable, to meet claims against it.
The FSCS will only become involved if a company is:
• FCA or Prudential Regulation Authority (PRA) (or previously,
FSA, FIMBRA or the PIA) authorised; and
• unable, or likely to be unable, to meet claims against it.
Page 3 of 11
Protection at a glance
Through ARC and One Retirement your client can access a range of investments
with various levels of complexity. The measures taken to protect your client’s assets
could depend on the type of investment.
Take a look at the table below to find out how each type of investment is generally treated.
Investment type Level 1
Aegon
Level 2
Investment
provider
Level 3
FSCS
Cash
Assets are ring
fenced from
the investment
provider’s own
assets.
Funds are protected
up to £85,000 per
eligible claimant per
authorised firm.
• Funds are held separately from
our own assets.
• Depending on the product, funds
are managed in accordance with
the FCA’s Conduct of Business
Sourcebook rules (COBS), Markets
in Financial Instruments Directive
(MiFID) or client money rules which
prohibit the misuse of clients’ money.
Insured funds
(internal funds)
Funds are insured and have governance
and management protocols which
you can find at aegon.co.uk/funds/
governance
Scottish Equitable
Funds are protected
plc ring fences the
for 100% of total
assets within these
assets held.
funds from their own.
Insured funds
(external fund
links)
Insured funds with external fund links
(EFLs) are monitored by us to check
they’re managed in line with the
underlying fund manager’s objectives.
These are monitored in line with our
governance and management protocols
which you can find at aegon.co.uk/
funds/governance
Funds are ring
fenced from
the underlying
investment
provider’s own
assets.
Some funds are
protected up to
100% of total assets
held. If reinsurance
takes place no
protection is offered.
(Reinsurance is
where an insured
fund buys units
within another
insured fund).
Collectives
(retail)
Funds are ring fenced from our own
assets.
Funds are ring
fenced from the
investment provider’s
own assets.
Some funds are
protected up to
£50,000 of total
assets held.
Page 4 of 11
Investment type Level 1
Aegon
Level 2
Investment
provider
Level 3
FSCS
Collectives
(institutional)
Funds are owned by us, so no
protection is provided and in the event
Aegon became insolvent these assets
could be made available to creditors.
As a large company
Aegon may be
classified as a
creditor and can
claim against
the investment
provider’s own
assets as a creditor,
if suitable.
As these funds are
held in the name
of the nominee
companies (see
below), claims can’t
be made to the
FSCS as Aegon is
classified as a large
company.
Exchange
traded funds
(ETFs)
Funds are ring fenced from our own
assets.
Funds are ring
fenced from
the investment
provider’s own
assets. (Loan credits
on ETFs may not
be protected unless
specifically stated.)
No protection
offered.
Equities
Funds are ring fenced from our own
assets.
Not applicable.
No protection
offered.
Structured
products
Funds are ring fenced from our own
assets.
The underlying
structure and setup
of the product may
vary, this could
impact the level
of assurance and
protection offered.
Protection depends
on the structure
and setup of the
product.
Guarantees
Funds are ring fenced from our own
assets.
Funds are ring
fenced from the
investment provider’s
own assets.
Funds are protected
for 100% of total
assets held. See our
guarantees section.
Page 5 of 11
Aegon’s responsibilities
The Aegon SIPP (available through ARC) and One Retirement account are
pensions provided under the Aegon Self-invested Personal Pension Scheme.
This is a trust based personal pension scheme, with Aegon Pension Trustee
Limited (APT) as the trustee. The assets of the scheme are owned by APT,
separating them from the assets of Scottish Equitable plc.
Aegon Investment Solutions Limited (AISL) is
responsible for the management of ARC’s ISA
and General Investment Account (GIA).
APT and AISL have appointed nominee companies
to hold the assets on their behalf. The nominee
companies are:
• SIPP and One Retirement –
Aegon SIPP Nominee Limited
• ISA – Aegon Nominee 3 (ISA) Limited
• GIA (net) – Aegon Nominee 2 (Net) Limited
• GIA (gross) – Aegon Nominee 1 (Gross) Limited
Aegon Investment Solutions Limited
As the manager of our ISA and GIA, AISL is
responsible for making sure that the operational
management of these products is in line with the
MiFID and Client Assets (CASS) regulations. These
regulations make sure that the relevant investment
restrictions apply to ISAs, and clients’ assets are
protected and responsibly administered.
AISL separates clients’ assets from Aegon’s own
assets to ensure that if in the event Aegon was to
default, the clients’ assets would be protected from
any possible creditors or outstanding liabilities.
Aegon Pension Trustees Limited
It’s the responsibility of APT, and Scottish Equitable
plc as the scheme administrator, to make sure all
assets held or managed by Aegon are in line with
the FCA’s COBS regulations, and that we take the
necessary measures to protect our clients’ assets.
These measures can include:
• carrying out regular due diligence on banks
and fund managers;
• making sure clients’ assets are not used to
fund other activities;
• making sure the record keeping of clients’
assets are correctly managed; and
• holding clients’ assets separately from our own
so if in the event Aegon defaulted, clients’ assets
would be protected from any possible creditors
or outstanding liabilities.
Page 6 of 11
Investment providers’ responsibilities
With many investments, the legal structure required to manage the investment
ensures greater protection of clients’ assets, such is the case with collectives
that operate in line with the Financial Service and Markets Act 2000 (FSMA).
Collective fund schemes have a responsibility to appoint a depositary who is
independent to the fund’s board or the fund’s authorised corporate director.
The depositary is responsible for ensuring the assets are segregated from the
fund manager’s own assets and oversees the safe custody of these assets.
Like collectives, unit trusts appoint a trustee who has similar responsibilities to that of a depositary
for a collective and who’s responsible for ensuring the fund manager keeps to the fund’s investment
objective and safeguards the trust’s assets.
FSCS responsibilities
The FSCS is an independent body set up under the FSMA. The FSCS deals with
claims against authorised firms regulated by the FCA or PRA. This usually happens
because a firm has stopped trading and doesn’t have enough assets to meet claims,
or is in insolvency. This is described as being in default.
The primary role of the FSCS is to protect
policyholders. They work with insolvency
practitioners, responsible for the ongoing
administration of the firm and the settlement of
claims, to determine their involvement to make
sure that policyholders have clear instructions on
how to make a claim, and what to do if they need
immediate assistance.
The FSCS can also provide funds to meet protected
claims. This can include returning premiums if a firm
is unable to. In some cases, funds from the insolvent
firm may be available to pay some of the amount due
to a client. If the amount paid is less than the FSCS
compensation limit, then the client can make a claim
on the FSCS for compensation for the balance in line
with the FSCS compensation rules. The FSCS can also
try to arrange (or help with) a transfer of some of the
business to other providers, if this is cost effective
and practical.
Page 7 of 11
Who can claim?
The table below provides a summary of who can make a claim. Overseas financial
services institutions and large companies can’t make claims.
Investor type
Qualifying criteria
Private individuals
Only a natural or legal person as outlined by the Interpretation
Act 1978 qualifies for FSCS protection.
Companies
Only smaller companies qualify for making a claim to the FSCS.
A smaller company must meet two of the following criteria (as set
out in section 247 of the Companies Act 1985 or section 382 of
the Companies Act 2006 as applicable):
• Turnover: not more than £6.5 million.
• Balance sheet total: not more than £3.26 million.
• Total number of employees: not more than 50.
Mutual or unincorporated Only mutual associations or unincorporated associations with
net assets of less than £1.4 million (or its equivalent in any other
association
currency at the relevant time) can qualify for FSCS protection.
Charities
Charities can be set up as limited companies, or mutual or
unincorporated associations.
In each case the qualification criteria for FSCS protection is
the same as for companies and mutual or unincorporated
associations.
Trusts
Trustees of estate planning type trusts qualify for FSCS protection,
as long as they’re based in the UK.
Full details of who’s eligible to benefit from the FSCS protection can be found
in the FCA’s compensation rules.
Page 8 of 11
FSCS limits
The Aegon SIPP and One Retirement
The Aegon SIPP and One Retirement account can hold many different types
of assets. Whether the FSCS gets involved in claims depends on the investments
held, and who’s actually in default.
The Aegon SIPP and One Retirement account are insurance contracts and can be protected up
to 100% of the claim without limit if the client is invested in in-house insured funds. If the client is
invested in non-insured investments the level of protection provided may vary depending on the
underlying investment type.
If a mis-selling claim is involved then it’s dealt with as advice relating to investment, and is subject
to the investment limit of £50,000.
Insured funds
External fund links
Aegon’s insured funds are either in-house funds
managed by Scottish Equitable plc or EFLs offered
by a selection of UK fund managers.
For an EFL, it could be possible for either Scottish
Equitable plc or the EFL provider to be in default.
If Scottish Equitable plc defaulted, the assets of the
EFL would still be classed as an asset of the Aegon
SIPP or One Retirement account and so would be
protected from liquidators.
In-house funds
If Scottish Equitable plc defaulted, in-house insured
fund holdings would still be classed as an asset of the
Aegon SIPP or One Retirement account, and would
be protected from liquidators.
If Scottish Equitable plc was in default, an insolvency
practitioner wouldn’t view them as belonging to
Scottish Equitable plc because an independent
custodian holds the assets of the insured funds
separately from Scottish Equitable plc’s assets.
Instead, they would be viewed as assets of Aegon
SIPP Nominee who holds them for APT (the trustee
of the pension scheme), so would be protected.
However a new fund manager may have to be found
to manage the funds.
For an EFL, the assets are held separately from the
fund manager’s own assets. The FCA requires a fund
manager to appoint a depositary (who is responsible
for keeping assets of an investment fund secure). The
depositary must appoint a custodian to act on their
behalf. As a result, the assets are held separately
from the EFL manager’s own assets in case they
become insolvent.
If the assets are misappropriated (for example
in cases of fraud where the assets are stolen) this
would result in Scottish Equitable plc being barred
from claiming under the FSCS due to the FCA’s
large company rules.
In this situation Scottish Equitable plc would be able
to bring a claim against the firm and its administrators
in an attempt to recover the value of the lost assets.
This would be in line with its legal agreement with
the firm in default when the external fund link was
first established. There’s no guarantee we would
recover all or any of the value of the lost assets.
Page 9 of 11
Self-invested assets
Equities
If the provider of a self-invested asset became
insolvent Scottish Equitable plc, as the scheme
administrator, will make a claim against the liquidator
of the provider and on any compensation scheme.
The compensation for equities depends on the
shares held. Unless the shares were Aegon shares,
their value wouldn’t be affected by Aegon becoming
insolvent. Aegon SIPP Nominee Limited hold the
assets of a SIPP separate from the Aegon business.
So, in the event of Aegon being declared insolvent,
the nominee will still hold any shares as a SIPP asset.
Their value wouldn’t be affected and SIPP assets
wouldn’t be paid to any liquidator.
If the underlying provider is subject to the FSCS,
then a claim could be made. If the provider isn’t
based in the UK (the Channel Islands and the Isle
of Man are classed as not being in the UK), then any
compensation scheme will be a local one and not
the FSCS.
If the underlying investment falls within the FSCS
investment sub-scheme (for example, an OEIC
or unit trust) and the provider of that investment
becomes insolvent, protection is limited to a
maximum of £50,000. This protection is per investor.
However, the FCA requires a fund manager to
appoint a depositary who’s responsible for keeping
the assets of an investment fund secure. The
depositary then appoints a custodian to act on their
behalf. This arrangement means that the assets
would be held separately from the fund manager’s
own assets, offering a strong level of protection in
the event of the fund manager’s insolvency.
Institutional collectives
Investments made in institutional collectives wouldn’t
qualify for any compensation from the FSCS, as the
assets belong to Aegon SIPP Nominee Limited. If a
fund or asset manager becomes insolvent, Aegon
SIPP Nominee Limited would be barred from claiming
under the FSCS under the FCA’s large company rules.
Discretionary fund management
It’s the actual investment that dictates if cover is
available through the FSCS, rather than whether
the services of a discretionary fund manager
(DFM) have been used. A DFM should be clear
about the compensation that the individual could
receive before making an investment. In the event
of a DFM’s default, the investments would still be
held by APT or AISL and so would be protected
depending on the type of investment.
Trustee Investment Plan
A Trustee Investment Plan falls under the insurance
contract definition (pensions), so is protected to
the level of 100% of the value of the whole claim,
without limit.
Workplace SIPP
For a group pension scheme under ARC, each
member’s benefit would be treated separately on
its own merits. A claim would be made in respect
of each member and not as a single scheme.
Deposits
The money held in your client’s cash facility is a
deposit. In the event that the deposit taker is unable
to meet its obligations the maximum compensation
limit is £85,000 (gross). This limit applies per eligible
claimant per authorised firm. The FSCS would
aggregate all monies of that individual in assessing
any compensation due, including any other private
savings held with the deposit taker. Any outstanding
loan amounts, such as commercial properties, held
by the deposit taker will be excluded from the claim
process and won’t be used to offset the claim limit.
Page 10 of 11
ISA and GIA
ARC’s ISA and GIA are managed by AISL. As part of
this arrangement these assets are ring fenced and
held in the name of a nominee company mentioned
above to help protect clients assets. This means that
these assets aren’t available for the defaulting firm’s
creditors to settle outstanding debts. However
in the event that a default occurs and the FSCS
is required to support claims the limits described
below apply.
Deposits
The money held in your client’s cash facility and
your Cash ISA is a deposit. In the event that the
deposit taker is unable to meet its obligations
the maximum compensation limit is £85,000
(gross). This limit applies per eligible claimant,
per authorised firm. The FSCS would aggregate
all monies of that individual in assessing any
compensation due, including any other private
savings held with the deposit taker. Any outstanding
loan amounts, such as commercial properties, held
by the deposit taker will be excluded from the claim
process and won’t be used to offset the claim limit.
Retail collectives
For investment claims the FSCS can pay up to
a maximum £50,000 per person, per firm.
Institutional collectives
Investments made in institutional collectives
wouldn’t qualify for any compensation from the
FSCS as the assets belong to AISL. If a fund or
asset manager becomes insolvent, AISL would be
barred from claiming under the FSCS under the
FCA’s large company rules meaning these assets
have no protection or recourse available to the
individual investor.
Equities
The situation for equities depends on the shares
held. Unless the shares were Aegon shares, their
value would not be affected by Aegon becoming
insolvent. AISL ring fences all these investments from
the Aegon business. So, in the event of Aegon being
declared insolvent, AISL as the nominee will still hold
any shares, and their value would be unaffected.
If the company whose shares are held in the ISA
and/or GIA defaults or the share price loses value,
it affects the value of the shares. There wouldn’t be
any compensation in this case from the FSCS.
Page 11 of 11
International bonds
This section relates to international bonds sold
through Aegon Ireland plc.
Aegon Ireland plc
Aegon Ireland plc is authorised by the Central Bank
of Ireland and regulated by the FCA for the conduct
of UK business. As Aegon Ireland is based in Ireland
it complies with the European Life Directives.
What protection do clients get from
the FSCS?
If Aegon Ireland (as an insurer in the European
Economic Area) became unable to meet its liabilities,
a policyholder who was habitually a UK resident
when the contract started will be covered by the
provisions of the Financial Services Compensation
Scheme (FSCS). Insurance business of this type is
generally covered for 100% of the value of the whole
claim, without limit.
Trustees
Under the FCA rules, trustees of estate planning
type trusts are covered by the FSCS if they are UK
based. Trustees of pension and retirement funds are
eligible to make a claim on a long-term insurance
contract if they’re:
• a trustee of a personal pension or stakeholder
scheme (which isn’t an occupational pension
scheme); or
• a trustee of a small self-administered scheme
or an occupational scheme of an employer.
Secure retirement income
It’s important to know that any guarantee is based
on the ability of the issuing insurance company –
in this case Scottish Equitable plc – to pay it. If,
for example, that company no longer existed,
then the guarantee(s) would be affected.
If we become unable to meet our liabilities and
if you’re habitually a UK resident when the contract
started you’ll be covered by the provisions of the
Financial Services Compensation Scheme (FSCS).
Insurance business of this type is generally covered for
100% of the value of the whole claim, without limit.
To find out more about ARC and One Retirement,
please speak to your usual Aegon representative.
We’re proud to be the
Lead Partner of British Tennis.
For Financial Advisers Only. Aegon is a brand name of Scottish Equitable plc (No. SC144517) and Aegon Investment Solutions Ltd
(No. SC394519) registered in Scotland, registered office: Edinburgh Park, Edinburgh, EH12 9SE. Both are Aegon companies. Scottish Equitable
plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Aegon Investment Solutions Ltd is authorised and regulated by the Financial Conduct Authority. Their Financial Services Register numbers are
165548 and 543123 respectively. © 2015 Aegon UK plc
C 290935 ARC 270403 12/15