vanguard FSC compensation scheme

designer12

I have an index fund with Vanguard. All of the money is invested in shares within an ISA. I am unclear how relevant the FSC compensation scheme is when it comes to shares. If Vanguard were to becomes insolvent, would I lose my shares? In which case it would be important for no investment to be larger than £85000. Or is this not applicable as it's not cash but shares?

MX5huggy

You own the shares, Vanguard going bust would not change that. 

The problem would be accessing your shares while the mess was sorted out. 

dunstonh

 All of the money is invested in shares within an ISA.

If you have an index fund then you do not have shares.  You have units in a fund.   The fund may hold shares but you do not.

 I am unclear how relevant the FSC compensation scheme is when it comes to shares. 

Shares do not get FSCS protection.  However, funds can do depending on their type.    If your fund is an ETF then you do not get FSCS protection.  If its an OEIC/UT then you do but its largely irrelevant as there is very little scope for it to pay out.  If its an offshore fund (which some of Vanguard's funds are) then these are not covered by the FSCS but there may be protection from the countries they are domiciled in.

 If Vanguard were to becomes insolvent, would I lose my shares?

That is a highly unlikely scenario due to the nature of Vanguard's business.  However, long before it got to that stage, it would have sold off lots of assets and withdrawn from various countries around the world selling bits of the business in the process to raise money.    In the unlikely event there is no buyers (and there would be for Vanguard due to the nature of its investment funds) then it would be wound down and assets sold and returned to cash and accounts closed.

If you are also with the Vanguard platform rather than a whole of market platform, then it may be a bit more painful as the process of shutting that down could prevent access to your funds for a couple of years.

 In which case it would be important for no investment to be larger than £85000. 

If you stick the mainstream, then FSCS protection on funds isn't really necessary.   If you go away from the mainstream then FSCS protection can become more important but it still won't pay out if the value goes down due to asset prices.  Fraud is the main area covered.

If you are a little concerned you can mitigate it by placing no more than £85k with any one fund house.

Albermarle

designer12 said:

I have an index fund with Vanguard. All of the money is invested in shares within an ISA. I am unclear how relevant the FSC compensation scheme is when it comes to shares. If Vanguard were to becomes insolvent, would I lose my shares? In which case it would be important for no investment to be larger than £85000. Or is this not applicable as it's not cash but shares?

If a company like Vanguard was to become insolvent , then it is highly likely that the global economy will have also collapsed.
In which case your investments would probably be the least of your worries.

tebbins

All of Vanguard funds available on the Vanguard platform are, last time I checked, subsidiaries of a single company, which is in turn a subsidiary of the "main" Vanguard Inc based in the US. This company is owned by the funds it manages, in turn meaning that that the ultimate beneficiary shareholders are tens of millions of Americans.
It would take an actual global economic collapse, fraud, or incompetence on a scale that makes Trump and BoJo seem useful, for the FSCS to become relevant.
What you can do to protect yourself is spread your holdings around different platforms and funds.