Just how dangerous is it to go above the £50k FSCS limit for investments?

Gaaraz

Just thinking that I've tried to have a diversified portfolio in terms of funds (though I'm mostly with Vanguard - who afaik have a very unique structure which protects you somewhat) but my entire ISA amount is with iWeb.

Would you guys generally recommend making sure to never go above £50k per financial institution? Thank you

Owain_Moneysaver

I suppose it depends on the institution.

The Government so far has propped up the big banks, but might not see the economic or political need for a smaller bank, unit trust etc.

You're probably aware, but others might not be, that often different 'brands' are combined under one institution for FSCS protection purposes and the limit applies across the 'brands', not individually (eg Post Office and Bank of Ireland; or Birmingham Midshires, Halifax and Bank of Scotland).

I think the limits are £85k for savings (reducing to £75k from 31 Dec) and £50k for investments?

Archi_Bald

It's been discussed on the forum before - if I find the link to the thread I'll post it.

In the meantime this is of interest: http://monevator.com/investor-compensation-scheme/

Glen_Clark

As I understand it, if the platform or fund had a shortfall because a Bernard Madoff in it had been trousering your money instead of buying shares with it, then any shortfall would be shared among all investors.
But rather than the loss being shared on a percentage basis, each investor would lose the same sum irrespective of the amount they had in the fund - unless of course they had less than that sum. Since this should be less than the compensation limit, everyone would be reimbursed by the compensation scheme.
The chances of their being nothing in the fund as there was with Madoff seem inconceivable - somebody would have spotted it before it got to that stage. Madoff only got away with it because he kept everything to himself, operating on a nod and a wink basis with his clients, insinuating they were profiting from his inside information so should keep it to themselves.

masonic

https://forums.moneysavingexpert.com/discussion/5264350
https://forums.moneysavingexpert.com/discussion/5229440

jimjames

I wouldn't call it dangerous at all. I have more with 1 provider.

Gaaraz

Thank you all very much for the responses - it seems like even if I'm not totally strict about keeping it to £50k per institution, it's probably sensible to not have everything in just the one place (i.e. iWeb) just in case something does go wrong Really appreciate your advice.