FSCS on Investing sites?

JakeHyde

Hey guys,
So I was wondering about the £85,000 FSCS protection on investments sites?
I was watching some youtube videos about investing, and SIPPs, and they say how I need to make sure it's FSCS protected.

But am I right in thinking, if your funds are invested in actual stocks, the £85k protection is invalid? 

I ask this ask I'm about to get my SIPP with InvestEngine. I already have my ISA with them and I'm pretty happy.  But if my ISA and SIPP grow to say £100k each...  that's way above the £85k protection allowance.  

But... that's irrelevant, is that right?  Their ETF's are ring-fenced anyway?   Does someone have any insight on this?  I asked InvestEngine, but they conveniently answered one question but not the other.

dunstonh

But am I right in thinking, if your funds are invested in actual stocks, the £85k protection is invalid? 

No.

If you buy shares, ETFs or ITs (or other quoted investments) then you get no FSCS protection.   However, if you buy OEICs, Unit Trusts or ICVCs then you do get FSCS protection (not that it matters 99.99% of the time).

But... that's irrelevant, is that right?  Their ETF's are ring-fenced anyway? 

Yes.    FSCS protection on investments is not like deposits.

Linton

JakeHyde said:

Hey guys,
So I was wondering about the £85,000 FSCS protection on investments sites?
I was watching some youtube videos about investing, and SIPPs, and they say how I need to make sure it's FSCS protected.

But am I right in thinking, if your funds are invested in actual stocks, the £85k protection is invalid? 

I ask this ask I'm about to get my SIPP with InvestEngine. I already have my ISA with them and I'm pretty happy.  But if my ISA and SIPP grow to say £100k each...  that's way above the £85k protection allowance.  

But... that's irrelevant, is that right?  Their ETF's are ring-fenced anyway?   Does someone have any insight on this?  I asked InvestEngine, but they conveniently answered one question but not the other.

If you put your money in a bank account then it becomes the bank's money and can be used to repay the bank's debts if need be.  There is no ring fencing, hence the FSCS scheme.

Money held in funds on a platform is ring fenced both within the platform and within the fund manager. It cannot be used to pay those companies' debts. Assuming you use mainstream regulated funds on a mainstream regulated platform it is difficult to see in what circumstances FSCS protection would be applicable. Note that FSCS wont protect you against poor or unlucky investing.  

Many people including myself have nX£100K on individual platforms.  The main risk is if a platform has major IT or business  problems you could lose access to your money while things are sorted out.  Therefore it may make sense for example to keep your ISAs on one plaform and your pensions on another or split between his and hers investments.

JakeHyde

Thank you @dunstonh

Linton said:

JakeHyde said:

Hey guys,
So I was wondering about the £85,000 FSCS protection on investments sites?
I was watching some youtube videos about investing, and SIPPs, and they say how I need to make sure it's FSCS protected.

But am I right in thinking, if your funds are invested in actual stocks, the £85k protection is invalid? 

I ask this ask I'm about to get my SIPP with InvestEngine. I already have my ISA with them and I'm pretty happy.  But if my ISA and SIPP grow to say £100k each...  that's way above the £85k protection allowance.  

But... that's irrelevant, is that right?  Their ETF's are ring-fenced anyway?   Does someone have any insight on this?  I asked InvestEngine, but they conveniently answered one question but not the other.

If you put your money in a bank account then it becomes the bank's money and can be used to repay the bank's debts if need be.  There is no ring fencing, hence the FSCS scheme.

Money held in funds on a platform is ring fenced both within the platform and within the fund manager. It cannot be used to pay those companies' debts. Assuming you use mainstream regulated funds on a mainstream regulated platform it is difficult to see in what circumstances FSCS protection would be applicable. Note that FSCS wont protect you against poor or unlucky investing.  

Many people including myself have nX£100K on individual platforms.  The main risk is if a platform has major IT or business  problems you could lose access to your money while things are sorted out.  Therefore it may make sense for example to keep your ISAs on one plaform and your pensions on another or split between his and hers investments.

Great thanks Linton,

That's kinda what I thought, but you articulated it much better.

For now, I think I'll just keep them together. InvestEngine seems to have some great fees. Maybe when I start getting top heavy, I'll think about separating them maybe!? It's not a bridge I'll be needing to cross any time soon.

JakeHyde

https://youtu.be/pG6ElNeIvMs

Kaizen917

Its a funny topic to wrap our heads around sometimes. I feel that people perceive paying higher fees on established platforms as a form of insurance to be with a provider less likely to either collapse or have something wrong going on with them.Im not sure how this actually reflects reality or if it even matters when they are FCA regulated but perhaps it gains importance when people go into six figures or more.

dunstonh

Kaizen917 said:

Its a funny topic to wrap our heads around sometimes. I feel that people perceive paying higher fees on established platforms as a form of insurance to be with a provider less likely to either collapse or have something wrong going on with them.Im not sure how this actually reflects reality or if it even matters when they are FCA regulated but perhaps it gains importance when people go into six figures or more.

Profitable platforms which mostly deal in liquid assets are less likely to fail than unprofitable platforms that have higher levels of illiquid assets.         It is also very real and evidenced with some platforms going to the wall because of illiquid assets and no-one wanting them whilst other failing platforms with liquid assets have found a buyer easily.

FCA regulation ensures a standard and it ensures FSCS is available at platform level.  No FCA regulation usually means scam (if offering services to UK retail investors) but it also means no FSCS protection at platform level.

Albermarle

A common topic. @JakeHyde
Here is a link to a similar thread which also contains links to other similar threads.

S&S Isas and the £85k FSCS Limit — MoneySavingExpert Forum