S&S ISA - Investment Safety/Risks

nxdmsandkaskdjaqd

I wanted to understand more about the security/safety/risks of investments held within a S&S ISA (no cash).

Having used my ISA allowance each year and now having to think about which financial institution I should place my pension pot (SIPP) in a year’s time. I am concerned that putting all of my eggs in one basket may be an error of judgement. I am currently with HL, I like their platform, and know how to use their processes.

I appreciate that everyone’s S&S ISA is ring fenced in a Trust, and that the FSCS is not applicable in this instance, so what are the risks of all of one’s assets being in one financial institution? Or am I being over cautious?

bowlhead99

You are probably being overcautious... but if HL have acted fraudulently or negligently in failing to ring fence your assets or in running off with the money then there is some non-zero risk that you could lose more than the 50k compensation limit.

However, at year end they had £49.1bn assets under administration. If one of their senior managers fiddled the system to take £1bn out and run off to Brazil with it, overall the system would have lost 1/49th of its assets, and the actual recoverable assets do not match the total that should be ring fenced.

Perhaps half of those £49bn assets are on the SIPP platform and unaffected while it was only the other platforms who took the £1bn hit, (i.e. ISA and unwrapped) and investors there including yourself lost 2/49ths of their assets instead of the overall 1/49th implied by the overall asset level.

So if you think HL is going to lose a £billion of customer's assets through inadequate controls and mismanagement AND if 2/49ths of your assets are over £50,000 so wouldn't be covered by the FSCS, then it might be time to split up your assets amongst multiple providers.

Ifts

There was a 'Investor compensation schemes – are you covered?' write-up over on the Monevator blog that I posted on here a little while back:

https://forums.moneysavingexpert.com/discussion/4853288