Moneybox cash isa

Spidergirluk

I opened a cash ISA with Moneybox just before the new financial year but the interest is not protected by the FSCS until it’s paid out on my one year anniversary. Moneybox say they'd be liable if they went under but will they or the FSCS cover the rest of the funds which are sitting the holding banks? If they go under they would no longer be trading so how can they be held liable?

masonic

Spidergirluk said:

I opened a cash ISA with Moneybox just before the new financial year but the interest is not protected by the FSCS until it’s paid out on my one year anniversary. Moneybox say they'd be liable if they went under but will they or the FSCS cover the rest of the funds which are sitting the holding banks? If they go under they would no longer be trading so how can they be held liable?

The Summary Box information suggests that interest accrues daily and this appears to include the bonus rate. The bonus rate is not conditional on you holding the product for a minimum term. So the bit in bold does not appear to be true. Where did you read it?

FSCS cover is irrelevant to funds sitting in the holding banks unless those holding banks go bust. The money belongs to you and they would need to return it (most likely via ISA transfer). If Moneybox goes bust, then Joint Special Administrators would be appointed and they must prioritise return of client money and safeguard the infrastructure required to do so until the business is taken over or wound down. Most likely it would be taken over. Unless Moneybox happens to go bust on the day you make a large deposit or withdrawal, it is very unlikely they will be holding any of your funds in their client money account.

Spidergirluk

Here's what they said re the interest

masonic

Spidergirluk said:

Here's what they said re the interest

That doesn't look like an official statement that can be relied on. It looks more like the sort of thing a customer services agent might say. The poor grammar suggests that is precisely what it is. If so, I'd take it with a large pinch of salt as those working in such front line roles rarely have the knowledge or experience to opine on such matters.

What matters is whether there is an obligation upon an FCA authorised firm operating within its permissions to pay the interest. If so, then that obligation creates a compensable loss that can be claimed through the FSCS.

Assume for sake of argument that what they said above was true, and Moneybox was responsible for paying interest independently of the firm providing the cash ISA. That would mean that "re-investing" the interest that was "sitting with Moneybox" into the ISA would be a subscription that would eat into your annual allowance. They are not entitled to credit any external monies to an ISA without affecting your annual allowance. Does this seem at all plausible, or does the interest accrue within the ISA managed by the FSCS protected bank?

It is also wholly wrong to state that Moneybox is not FSCS protected. Even without them directly holding any of your money, if you made a complaint against Moneybox, took it to the Financial Ombudsman Service, got awarded compensation, and in the mean time Moneybox went bust, you could take your compensation claim to the FSCS. Likewise there is FSCS protection if you are extremely unlucky and they happened to be moving some of your money through their client money account on the day they went bust, just as there is for any sum of money they have an obligation to pay you in respect of the regulated services in the contract you've entered into.

Spidergirluk

You're right, the response was from their customer service agent who I don't think was too sure themselves and had to check with their legal team! So, ultimately I want to know whether my money's safe with Moneybox or should I think about transferring out to an alternative ISA?

masonic

Here is the official info about FSCS protection: https://www.moneyboxapp.com/fscs-protection/

The only thing I think you should take note of is the bit at the bottom about Direct Debit payments, because these aren't protected while being processed, so I'd suggest not using this method of paying in as it is also likely to be relatively slow. Other than that, there is no suggestion that your money would lack FSCS protection at any time.

Spidergirluk

It states on their website that they are covered by the FSCS but the response from the agent says they're not. On the app showing the breakdown of my funds, it says that "interest due is not covered by FSCS"

friolento

Interest is only FSCS protected after it has been credited to the account, 12 months after account opening, and annually thereafter

Spidergirluk

Yes but what would happen if they were to go bust tomorrow, who would be liable to pay back everything?

masonic

That's not a good look. I haven't read through the T&C, is it mentioned there at all? It is not something that should be presented to customers only after they've opened the account.

There is a potentially a difference between interest due and interest accrued. Interest due could mean interest that is anticipated to be paid in the future but might have other conditions attached. Interest accrued is that which has already accumulated and that you are already unconditionally entitled to be paid. FSCS would cover the latter but not the former.

Even Sharia accounts with expected profit instead of interest accrue interest daily, so the only uncertainty is around future "profit" in that case. I have no problem holding those accounts, but I would dodge an account like this and go for the next best option I'm able to fully understand.

This also makes me question what interest you'd receive if closing the account or transferring out within a year.

[Deleted User]

Personally I’d rather avoid them and deposit directly with a bank or building society directly (for significant funds that is)