Compensation Scheme for Nominee Shareholdings

MasterMiser

The £85,000 compensation limit for cash savings is widely known and often publicised in the press. What is less widely known is that the compensation limit for shares held in nominee accounts is only £50,000.

Those who invest in shares ISAs are compelled to use nominee accounts for their holdings under the government rules for ISAs. Anyone who has invested in shares ISAs for a while will have significantly more invested than £50,000. Either fraud or incompetence could cause shareholdings in a nominee account to go missing. I and a friend of mine are concerned about the possibility, albeit it remote, that our savings could suffer a massive hit and my friend has set up an e-petition asking for either the compensation limit to be substantially increased or for nominee companies to be required to insure against the possibility of default.

If you share our concern, the link to the e-petition is

http://epetitions.direct.gov.uk/petitions/48797

Please encourage anyone you know to sign it.

westy22

The shares or funds you hold in a nominee account are ring-fenced away from the platform in a non-trading holding account. Therefore any holdings should be safe in the event of the trading platform getting into financial problems.

That said, any extra protection is always welcome so I would support the petition but I very much doubt that the Government would see it as any sort of priority given that they cannot possibly afford to pay the protection they already offer!

IronWolf

Hi

It worries me too about my broker taking care of the nominee account. I suppose thats the risk you take for the tax avantages of an isa and cheaper dealing costs of nominee accounts.

I like the insurance idea, not sure about increasing the limit though.

Biggles

OP, you start off by talking about a 'Compensation Scheme for Nominee Shareholdings' but the petition is only for S&S ISAs, not nominee shareholdings generally.

Maybe that's why it only has 4 signatures.

grey_gym_sock

you can use more than 1 S&S ISA provider. you can even split up an existing ISA using partial transfers (except for the current tax year's subscriptions).

if you're thinking about the worst-case scenario, i'm not sure that insurance helps, because a company might fail to pay the next insurance premium just before they defaulted.

i think the £50k limit should be higher, though i wouldn't mind if it were 100% of the first £50k, and then only 90% of the next so-much.

for comparison, the insurance section of the FSCS covers 90% without any limit: http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/