Splitting S&S funds?

gterr

Hi there,

I'm just preparing to invest a lump sum in a S&S Fund (which will feed a S&S ISA over a number of years).

I've spent a long time deciding on my investments, but have suddenly realised I've forgotten to think about the size of the funds and the FCA protection scheme.

The lump sum will be approx. 180K, and splitting this between separate accounts for husband and self is still going to mean that each fund exceeds the maximum amount protected, which I understand is 50K per person (not 85K).

What do others do in this situation? Split across two platforms? Duplicate holdings in each? I'm really not looking forward to the rebalancing if more than one platform is involved.

Linton

I dont see any real risk with having a large portfolio with a single account. The situation is totally different to that with banks where the money you deposit is owned by the bank and so could be lost should the bank fail.

With funds in an account, the broker has no ownership rights over your holdings. So if a broker fails your investments could not be used to pay his debts. Similarly the shares owned by a fund are not owned by the fund manager. So if a fund manager fails the fund can continue its own separate existence and be managed by someone else.

The only point I see of having several accounts with different brokers is to provide some protection against temporary disruptions arising from the reorganisation following a company failure or by other problems such as computer system failures.

kidmugsy

We split - SIPPS with one firm, ISAs with others. I find I'm happier, especially with ISAs, to have several even though the amount in each is far below the protection limit. If one firm's computers fail, another's will be working. (See the case of Hargreaves Lansdown this past Friday.)

kidmugsy

Linton wrote: »

So if a broker fails your investments could not be used to pay his debts.

Captain Maxwell didn't own the shares in several pension funds, but he simply stole them from a safe. OK, your broker probably won't be run by an ex-Labour MP, but you never know.

Diversify - it protects you from the unknown unknowns.

JohnRo

It's not quite like putting money in the bank, where you surrender all ownership of your tickets to the bank in question for little more than a promise they will pay you back on demand.

If push really came to shove the FSCS would likely prove hopelessly inadequate anyway. That's why some banks are too big to fail and the crooks that work there too big to stand trial.

The company you use to invest with can go bust and your investments will still exist, unless they're involved in some sort of ponzi type criminal enterprise which is extremely unlikely if they're FCA registered. Your money and investments should be completely ring fenced from any money used to operate the platform business on which your account is held.

That's not to say the investments you've bought can't themselves go bust but that's the nature of the beast and why you need to be careful what you choose.

That doesn't address your £50K question directly but I personally tend not to give it much thought, maybe I should. I'm far more concerned about what and who to invest in. If I had millions it might be a different story but I haven't.

This might help http://www.thisismoney.co.uk/money/diyinvesting/article-2311641/Is-DIY-investing-platform-safe-I-lose-money.html

gterr

Thanks all. I might compromise and split the unwrapped starting fund, but go for just one S&S ISA each.

In fact, since my platform contenders are HL and Charles Stanley I might, for the unwrapped fund, put the 70% I've allocated to Vanguard Lifestrategy funds with HL, and the 30% side funds with Charles Stanley. That way I optimise the different platform charging systems (at least until HL announce their new pricing schedule).

Thanks for your time.

JohnRo

At the risk of patronising, you do know the rules about only being allowed to subscribe new money to one ISA account per year right?

Scratch that I missed what you're doing, separate accounts

jimjames

gterr wrote: »

I've spent a long time deciding on my investments, but have suddenly realised I've forgotten to think about the size of the funds and the FCA protection scheme.

Are you aware that the protection doesn't cover your funds unless there is fraud or similar by the fund manager or the bank holding your cash awaiting deposit crashes.

It is likely that any portfolio would have funds from various different managers so the risk is even lower and would require fraud at multiple levels to kick in.

I'm not aware there has been any requirement to pay out against this scheme over the last 25 years unlike the FSCS which has paid out a number of times. As such it isn't something I'd be worrying about but if your money is split across 2 people's holdings then you are already reducing risk anyway.

Porcupine

One thing I was never sure about - does the £50K limit apply to the fund provider? Pick a fund provider - let's say Blackrock. I invest £20K in the Blackrock A fund, £20K in the Blackrock B fund and £20K in the Blackrock C fund. Different funds, different managers, investment strategies, etc etc. Does the £50K apply to my entire holding with Blackrock, or with the individual funds?