Shall I Split my isa for FSCS protection

Massum1987

Hello. I'm new here and very new to investing so I appreciate this could be a very basic question to ask.


I've got over £50k in my Charles Stanley Stocks and Shares ISA.
What's the limit for the FSCS for Stocks and shares ISA? and once I surpass this should I then open up an ISA on another platform for protection?


Thanks for any help.

talexuser

The limit is for a single fund provider. So if you split between two funds from different management houses within your Stanley platform, each less than 50K, you are fully protected.

eskbanker

talexuser wrote: »

The limit is for a single fund provider. So if you split between two funds from different management houses within your Stanley platform, each less than 50K, you are fully protected.

You're not fully protected in that scenario if the Charles Stanley platform went under though.

Possibly a moot point for OP anyway, in that it's only another four months until the FSCS compensation limit for investments is increased to £85K.

talexuser

Still your money remains invested in shares etc organised by the fund houses, Charles Stanley just administers the paper work. If they went bust another platform would just take over in the same way that small banks or building societies get bailed out by other ones. I suppose there is an infinitesimal chance your platform is a fraud and did not actually pass the money on to the funds.

masonic

talexuser wrote: »

I suppose there is an infinitesimal chance your platform is a fraud and did not actually pass the money on to the funds.

It's questionable whether you'd actually have any protection if that was the case. If investments were not made, and the money was stolen from the clients account, then the FSCS protection for cash deposits couldn't be invoked because the bank providing the clients account would not be liable, and the FSCS protection for investments couldn't be invoked because the money was not invested.

The language in the investments section of the FSCS website has been tightened up significantly, leading me to wonder whether DIY investors are protected at all.

Audaxer

masonic wrote: »

It's questionable whether you'd actually have any protection if that was the case. If investments were not made, and the money was stolen from the clients account, then the FSCS protection for cash deposits couldn't be invoked because the bank providing the clients account would not be liable, and the FSCS protection for investments couldn't be invoked because the money was not invested.

The language in the investments section of the FSCS website has been tightened up significantly, leading me to wonder whether DIY investors are protected at all.

The website does seem a but vague, but I'd be very surprised if DIY investments weren't covered for £50k (going up to £85k in April) if some funds went missing through fraud by the platform.

masonic

Audaxer wrote: »

The website does seem a but vague, but I'd be very surprised if DIY investments weren't covered for £50k (going up to £85k in April) if some funds went missing through fraud by the platform.

The website used to be a bit vague, now it seems very clear, with 4 specific conditions that must be met for compensation to be paid.

short_butt_sweet

masonic wrote: »

The website used to be a bit vague, now it seems very clear, with 4 specific conditions that must be met for compensation to be paid.

that FSCS webpage you linked to does seem to imply that FSCS protection for investments only applies when advice has been given (and when it is as a result of bad advice that money has been lost).

but this page suggests coverage is much broader:

For investment claims FSCS provides protection, for example:

• for loss arising from bad investment advice, poor investment management or misrepresentation
• when an authorised investment firm goes out of business and cannot return investments or money

Investments covered include: stocks and shares; unit trusts; futures and options; personal pension plans; and long-term investments such as mortgage endowments.

the latter page is more detailed, so i am more inclined to rely on it. the first page is perhaps intended to cover the more common types of claims under the FSCS investment section.

masonic

short_butt_sweet wrote: »

that FSCS webpage you linked to does seem to imply that FSCS protection for investments only applies when advice has been given (and when it is as a result of bad advice that money has been lost).

but this page suggests coverage is much broader:

the latter page is more detailed, so i am more inclined to rely on it. the first page is perhaps intended to cover the more common types of claims under the FSCS investment section.

That second page does seem much broader, for example it states:

"Investments covered include: stocks and shares; unit trusts; futures and options; personal pension plans; and long-term investments such as mortgage endowments."

The inclusion of stocks and shares seems to go against what most here believe (i.e. that direct equity investments, ETFs and investment trusts) are excluded.

I wonder which is true. Perhaps some types of investment are only covered if done under advice.

I note that that under "Eligibility" there is a broken link to the rules, but it appears the intention was to link to the "compensation limits" page (the one I posted above) - perhaps this page has not yet been updated where other parts of the site have. So the site is very confusing when it comes down to what is actually covered and I would certainly confirm this directly with the FSCS I felt this was an important protection.

Since I invest mainly in ETFs and ITs, I don't believe I have any appreciable cover under the scheme.

short_butt_sweet

yes, i thought the inclusion of "stocks and shares" was interesting. my interpretation was that there may be FSCS cover if an investment platform loses / cannot return an investor's shares (including shares in an investment trust or an ETF).

presumably where there is no FSCS cover is in the case where an investment trust or ETF "loses" the assets that it is supposed to be holding. so i still have my shares in the IT / ETF, but they are worth less than they should be (or are even worthless). in a similar situation, but with a (UK-based) unit trust or OEIC which "loses" the assets it should be holding, there may be FSCS cover.

it's all very interesting, but IMHO, stick to mainstream platforms and mainstream fund managers, and then it's hardly worth worrying about.

masonic

short_butt_sweet wrote: »

yes, i thought the inclusion of "stocks and shares" was interesting. my interpretation was that there may be FSCS cover if an investment platform loses / cannot return an investor's shares (including shares in an investment trust or an ETF).

presumably where there is no FSCS cover is in the case where an investment trust or ETF "loses" the assets that it is supposed to be holding. so i still have my shares in the IT / ETF, but they are worth less than they should be (or are even worthless). in a similar situation, but with a (UK-based) unit trust or OEIC which "loses" the assets it should be holding, there may be FSCS cover.

Yes, if a company (including an investment structured as a company) suffers fraud or goes bust, then that would be considered a normal investment loss and no compensation would be offered, unless you invested under advice and may be able to claim from your adviser for investments that were unsuitable for you.

The only other scenarios I can think of are where the investors money was not used in accordance with their instructions (essentially this is theft of money from the clients cash account) - there doesn't seem to be much clarity from anywhere as to whether this would be covered by the FSCS, or investments were made and the ring-fencing was broken down and the platform disposed of the investments to fund their business or steal the proceeds. Perhaps FSCS protection would apply in the latter case - but only if the loss was large enough to take the whole business down.

it's all very interesting, but IMHO, stick to mainstream platforms and mainstream fund managers, and then it's hardly worth worrying about.

Agreed, and even being several times over the limit is unlikely to leave you exposed when the shortfall is shared between many investors.