FSCS £85k protection in S&S ISA?

1404

Hi all,

So, if one has (for example) up to £85k in cash in a Santander 123 account then the UK government will underwrite and guarantee that you will get your £85k back no matter what?

How does that apply if one has (for example) an iWeb S&S ISA with various ETFs/funds/company shares and a chunk of cash sitting in the S&S ISA account? How exactly are those assets protected? Do they use the share price before or after the event which puts iWeb in trouble? And do you get your full amount of cash back which is sitting in the account?

On iWeb's website it says they are part of FSCS protection but that "up to 100% of your £85k" is protected.

"Up to"? So not all of your £85k may be protected then? Those two words "up to" shouldn't really be in the sentence... Otherwise the £85k protection doesn't seem like it's a real thing potentially?

masonic

1404 said:

Hi all,

So, if one has (for example) up to £85k in cash in a Santander 123 account then the UK government will underwrite and guarantee that you will get your £85k back no matter what?

How does that apply if one has (for example) an iWeb S&S ISA with various ETFs/funds/company shares and a chunk of cash sitting in the S&S ISA account? How exactly are those assets protected? Do they use the share price before or after the event which puts iWeb in trouble? And do you get your full amount of cash back which is sitting in the account?

On iWeb's website it says they are part of FSCS protection but that "up to 100% of your £85k" is protected.

"Up to"? So not all of your £85k may be protected then? Those two words "up to" shouldn't really be in the sentence... Otherwise the £85k protection doesn't seem like it's a real thing potentially?

Firstly, the "up to" in the case of iWeb is the same "up to" you used. I've highlighted both for your clarity. Protection for cash is "up to" £85k. You will not get £85k compensation unless your loss is at least £85k.

The protection for investments does not include investment risk, so if your ETFs/funds/company shares fall in value, you cannot get any compensation. If the company issuing your company shares goes bust then you have no protection, and if the investment company running your ETF goes bust then you have no protection. 

However, if an FCA authorised fund house running an open-ended fund goes bust, then you have a claim for the market value of the underlying assets the fund at the relevant bar date, and if this cannot be paid, you can claim compensation "up to" £85k. Likewise if Halifax Share Dealing goes bust, you have a claim for the market value of the ETFs/funds/company shares at the relevant bar date, and if this cannot be paid by either returning those assets or a cash payment (for example if administrator fees reduce the assets available for distribution and/or there are missing assets), then you have a claim for any shortfall "up to" £85k. 

Unlike the protection for cash, Halifax Share Dealing is not entitled to use your assets to finance their business, so in the case of having more than £85k invested at a large reputable provider like iWeb, the only compensation you are likely to need is enough to cover the per-investor cost of the administration, which is almost certainly going to be capped below the £85k limit.

1404

Here is the copy/paste quote from iWeb's website:

"Compensation of up to 100% of the first £85,000 of assets held is available to eligible claimants."

That reads to me like you may not get 100% of your £85k. Ie, you may get 50% of your first £85k which would be £42.5k.

dunstonh

So, if one has (for example) up to £85k in cash in a Santander 123 account then the UK government will underwrite and guarantee that you will get your £85k back no matter what?

The FSCS is not the Government.     The FSCS is funded by a levy on regulated financial services companies.   It has the ability to borrow from the Treasury.

How does that apply if one has (for example) an iWeb S&S ISA with various ETFs/funds/company shares and a chunk of cash sitting in the S&S ISA account? 

ETFs and shares do not get FSCS protection.  OEICs/UTs do at £85k per fund house.

 How exactly are those assets protected? Do they use the share price before or after the event which puts iWeb in trouble? And do you get your full amount of cash back which is sitting in the account?

iWeb being in trouble would not impact on the unit price of the funds.   There is nothing to compensate on that basis.

The platform and its account holders are assets that would look to be sold to another platform at a discount.  As long as the platform is light in illiquid assets then it should be desirable to others.     In which case, it would likely continue as a going concern until it is integrated with the buyer.       If no buyer is found, then it will be wound down.   That will involve selling the funds that are liquid and tradeable or allowing transfers out.     Upto this point, the FSCS isn't needed.

Then the illiquid assets would spend the next couple of decades being wound down and paid out as money is freed up. Again, the FSCS would not be needed.

Where the FSCS would step in is to go toward the cost of the administrators (this has been tested and used in several cases)

On iWeb's website it says they are part of FSCS protection but that "up to 100% of your £85k" is protected.
"Up to"? So not all of your £85k may be protected then? Those two words "up to" shouldn't really be in the sentence... Otherwise the £85k protection doesn't seem like it's a real thing potentially?

Mixing 100% and up to £85k in the same sentence is poor English.  Referring to 100% shouldn't really be there.  But "up to" is the correct way of saying it because you may have assets like ETFs or Shares which don't get FSCS protection.  Or you may hold the same fund across multiple platforms.  And its £85k per fund house.  Not £85k per fund house, per platform. Also, if someone has £40k of investments, they are not going to get £85k FSCS compensation.  So, "up to" covers that scenario 

"Compensation of up to 100% of the first £85,000 of assets held is available to eligible claimants."
That reads to me like you may not get 100% of your £85k. Ie, you may get 50% of your first £85k which would be £42.5k.

Correct. It should read that you may not get 100% of your £85k (again, very poor English) as that is the correct position.

1404

What about cash which is sitting in an iWeb S&S ISA account? Is that fully covered by FSCS (as long as the cash is below £85k)?

masonic

1404 said:

Here is the copy/paste quote from iWeb's website:

"Compensation of up to 100% of the first £85,000 of assets held is available to eligible claimants."

That reads to me like you may not get 100% of your £85k. Ie, you may get 50% of your first £85k which would be £42.5k.

I've highlighted the pertinent word in that statement. You may not get compensation of 100% of the first £85,000 assets held, because some or all of them will very likely be returned to you without the need for compensation.

1404 said:

What about cash which is sitting in an iWeb S&S ISA account? Is that fully covered by FSCS (as long as the cash is below £85k)?

It depends. If one of the banks holding client money from Halifax Share Dealing goes bust, then your total savings held with that bank would need to be taken into account. 

If Halifax Share Dealing goes bust, then your total loss as a result of the HSDL failure needs to be taken into account. It is hard to think of a realistic scenario where you would need to claim £85k, even if you have several multiples of this held at iWeb.

wmb194

1404 said:

What about cash which is sitting in an iWeb S&S ISA account? Is that fully covered by FSCS (as long as the cash is below £85k)?

It'll be covered by the FSCS protection of the banks it deposits it with. If you look in iWeb's terms it'll tell you but it should be spread between at least four banks. If you want to reduce the uncertainty I know with Barclays SmartInvestor you can choose to have all your deposits with Barclays UK.

Ultimately iWeb is owned by Lloyds so I wouldn't worry about it. I worry a lot more about some of the new stockbrokers that haven't yet turned a profit.