S&S ISA - FSA Protection Scheme

nxdmsandkaskdjaqd

I understand that any investments in a S&S ISA is ring fenced from any other parties. However, I understand that the actual funds invested in (Fidelity, Newton, HSBC, etc) are protected under the FSA Protection Scheme to the sum of £50,000 per fund.

Is this correct? And if this is correct, one should limit the amount invested in any one fund to less than £50,000!

jimjames

As far as I know funds are not protected but what are the risks?

1) Fund manager fraud? Pretty unlikely but possible although fund management group would probably cover any loss

2) Fund management group collapses? Funds would not be affected

3) Shares crash? Likely at some point but not covered anyway

If the £50,000 limit applied then it would be the management group that it covered so you'd need to make sure no more than £50000 in that company not fund.

nxdmsandkaskdjaqd

I did find this on the FSA website:

http://www.fsa.gov.uk/Pages/consumerinformation/compensation/limits/index.shtml

Which states:

Investments: £50,000

This limit applies to investments placed in firms declared in default from 1 January 2010.

jimjames

Clicking on that link gives some more info

http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-investments/

For an investment claim to be eligible to receive compensation from us, it must meet ALL of the following criteria:
(a) the advice you received to buy the investment must have been given on or after 28 August 1988; AND
(b) the firm that advised you must have been authorised by the appropriate regulator to do so at that time; AND
(c) you must have lost money as a result of the advice you were given; AND
(d) the firm (or its principals) no longer has sufficient assets to meet claims for compensation.

This would imply that you are not covered if you self invest ie do not use an IFA but as I mentioned in my previous post you need to assess what the risks are. I would suggest they are pretty small.