How much is covered by uk government if Investment house goes bust

Bartoni79

Hi, I've been searching for an answer to this for quite some time from investors and investment houses but and am given different answers so...
I have quite a bit invested with an investment company which specifically sells its own products/ funds/ SIPPS. I have money in a stocks and shares ISA (Stocks and ETFs (Gilt and Equity), and in a SIPP.
I understand that the FCIS will cover up 85k if the company goes bust. If I had 80k in EFTs and 80k in SIPPS, what amount of this is covered in the event of investment house going bust. I understand that if the value of the investment goes down, this is a risk of the stock market and part and parcel of investment, I'm specifically interested in if the company goes bust.
Many Thanks

El_Torro

If the investment company is just holding stocks and shares for you then assuming the investment company goes bust you still own those shares. The administrators will just reallocate them to you, probably via another investment company that they select. Of course it may take some time for you to get access to your money.

What could be more of an issue is if the platform that is holding your shares commits fraud on a grand scale and the money you thought was in shares is actually stolen. Then you might need to worry about whether you'll get your money back. Of course such widespread fraud is unlikely to happen (and the perpetrators are even less likely to get away with it), but the risk is there.

Thrugelmir

Investments are held on a nominee basis not by the company itself. The Company going bust shouldn't impact the investments held. A different situation to banks where effectively the money you have on deposit with them is lent out.  Should all the borrowers default then the bank has insufficient funds to repay everyone. 

dunstonh

How much is covered by uk government if Investment house goes bust

£0. The Government do not provide protection.  The financial services industry does.  The scheme has the ability to borrow from the Treasury though.

I have quite a bit invested with an investment company which specifically sells its own products/ funds/ SIPPS.

SIPP has £85k at wrapper level but the individual investments will depend on the assets used. 
Pension funds have 100% FSCS protection with no upper limit. Although there is some vagueness and disagreement where external fund managers are used (its never been tested and we will not know for sure until it is - although that is unlikely with pension funds).
UT/OEICs have £85k per fund house
ETFs/ITs have no FSCS protection

If I had 80k in EFTs and 80k in SIPPS, what amount of this is covered in the event of investment house going bust. 

£nil as ETFs do not get FSCS protection.

ChilliBob

dunstonh said:

UT/OEICs have £85k per fund house
ETFs/ITs have no FSCS protection

I'm curious what you mean by that. Say you had 200k in vanguard, perhaps 100k life start, 100k some other fund.. Surely if vanguard 'goes bust'  you get nothing?

My thinking was it would mean the funds has done bad and all investments have fsiled, but this is more of a private equity take on things I guess, value - 100. Not the case for a passive fund, or it would mean all the constituents of the indes they have purchased have gone bust.. If ifs msci global then that's kinda a big deal :0

I suppose this could cover some law suit or something which bankruptcy is the result or something?

It's just not something I'd read before so am thinking practically how it can apply and not quite connecting the dots in my head! 

dunstonh

I'm curious what you mean by that. Say you had 200k in vanguard, perhaps 100k life start, 100k some other fund.. Surely if vanguard 'goes bust'  you get nothing?

The underlying assets within the funds are ring fenced and belong to the investor.  However, if there was a fraud that brought Vanguard down and they hadn't been investing the money and it had gone missing, then you are covered for £85k.

With conventional unit linked funds there really is very little that the FSCS offers when you stick to the mainstream.

My thinking was it would mean the funds has done bad and all investments have fsiled, but this is more of a private equity take on things I guess, value - 100. Not the case for a passive fund, or it would mean all the constituents of the indes they have purchased have gone bust.. If ifs msci global then that's kinda a big deal :0

Investment returns are not protected.  So, losses, including total loss, as long as its not due to fraud are not covered by the FSCS.

ChilliBob

I see, that's actually better than I expected really. I didn't think there was any protection if say Vanguard or others went bust because they'd done something dodgy. 

Obviously investment loss is your loss to take on the chin, nothing you can do about that) well, except use the loss to offset gains potentially!).

Out of interest has the trading platform going bust scenario happened before? 

Albermarle

If Vanguard go bust , it would probably mean WW3 had just happened and your investments would be the last thing on your mind.

jimjames

ChilliBob said:

Out of interest has the trading platform going bust scenario happened before? 

Yes but not that often for mainstream brokers
https://forums.moneysavingexpert.com/discussion/6032496/svs-securities-shut-down#latest

Apodemus

Albermarle said:

...it would probably mean WW3 had just happened and your investments would be the last thing on your mind.

You are right, of course, but that is exactly what my FI said to me when convincing me to take out an endowment mortgage in 1989!

Thrugelmir

ChilliBob said:

Out of interest has the trading platform going bust scenario happened before? 

Stock brokers have gone under in the past, for activities outside of the mainstream remit though. Stick to established names and you'll be ok. When trading platforms become commercially unviable they are taken over by a larger group. As in any industry. Survival of the fittest.