FSCS

daveuser

This is a message for Martin. I think it would be worth mentioning that the FSCS 85k compensation scheme is subject to deductions from the 85k by administrators and lawyers. A recent case that made the news was of a pensioner who amongst many others lost their life savings when their fund managing company went bust. This particular pensioner lost over 300k. The 85k he thought he would get, was or is going to be, reduced by an eye watering 23k to pay administrators and legal fees. It came as a complete shock to me and no doubt will to many others. It might be safer to say 85k minus fees which can be a scandalous rip off. 

Brie

I thought the FSCS compensation up to £85k applied just to banks not fund managers.  Happy to be corrected on this.

la531983

daveuser said:

This is a message for Martin. I think it would be worth mentioning that the FSCS 85k compensation scheme is subject to deductions from the 85k by administrators and lawyers. A recent case that made the news was of a pensioner who amongst many others lost their life savings when their fund managing company went bust. This particular pensioner lost over 300k. The 85k he thought he would get, was or is going to be, reduced by an eye watering 23k to pay administrators and legal fees. It came as a complete shock to me and no doubt will to many others. It might be safer to say 85k minus fees which can be a scandalous rip off. 

Post the link.

Keep_pedalling

Martin won’t read this just us members.

The problem here is not the compensation scheme but people placing large sums in single high risk investments. Was this Woodford?

lookbook

Don't Keep_pedalling said:

Martin won’t read this just us members.

The problem here is not the compensation scheme but people placing large sums in single high risk investments. Was this Woodford?

Don't keep all your eggs in one basket.

dunstonh

This is a message for Martin.

Martin hasn't posted on the board since he sold this site many years ago.

I think it would be worth mentioning that the FSCS 85k compensation scheme is subject to deductions from the 85k by administrators and lawyers. 

Only in some scenarios, and that is typically where people go off the beaten track and use non-mainstream investments.

This particular pensioner lost over 300k. The 85k he thought he would get, was or is going to be, reduced by an eye watering 23k to pay administrators and legal fees. It came as a complete shock to me and no doubt will to many others.

it is quite normal and in most cases, the investor would still have their investments with no reduction on them.  In this particular case, that didn't happen.   It's very rare but does highlight the risk of moving away from the mainstream into niche options.

It might be safer to say 85k minus fees which can be a scandalous rip off. 

What rip off?   

masonic

daveuser said:

This is a message for Martin. I think it would be worth mentioning that the FSCS 85k compensation scheme is subject to deductions from the 85k by administrators and lawyers. A recent case that made the news was of a pensioner who amongst many others lost their life savings when their fund managing company went bust. This particular pensioner lost over 300k. The 85k he thought he would get, was or is going to be, reduced by an eye watering 23k to pay administrators and legal fees. It came as a complete shock to me and no doubt will to many others. It might be safer to say 85k minus fees which can be a scandalous rip off. 

The main purpose of FSCS protection applied to investment accounts is to insure against the cost of administration of a failed investment platform. So this is completely expected. FSCS protection does not apply to normal investment losses, so if the value of investments fall you won't be covered. When a fund house goes bust, then the funds themselves should still be holding investments that are ring-fenced from the fund managing company. These can be sold and the proceeds distributed to investors net of the administration costs. The FSCS would step in to cover the latter. Only in cases where the investor had another claim, such as for unsuitable advice, or losses due to fraud, would any compensation be payable in respect of the investments themselves. It is unclear what circumstances would have led to this "particular pensioner" having an FSCS claim above the £23k for fees. Perhaps you could elaborate?

If you look down the list of failed firms provided by the FSCS, around 100 in the past couple of years, none of these are recognisable names. Most are involved with pensions and/or investments, so if you avoid obscure providers you can significantly reduce your risk.

jimjames

Brie said:

I thought the FSCS compensation up to £85k applied just to banks not fund managers.  Happy to be corrected on this.

It applies to investments under certain scenarios but not for investment dropping in value.

This particular one appears to be fraud by the portfolio manager not fund manager but also raises questions for the FCA as a whistleblower alerted them 2 years before they took action.

If the portfolio manager pockets money destined for investment then you'd have cover but it's also a very rare and unusual situation. Using a mainstream platform will avoid most of the risks.

jimjames

Keep_pedalling said:

Martin won’t read this just us members.

The problem here is not the compensation scheme but people placing large sums in single high risk investments. Was this Woodford?

No, not Woodford. A niche manager for portfolios that appears to have substantial amounts missing from their assets.

masonic

Keep_pedalling said:

Was this Woodford?

My guess is WealthTek. Failed last year. Approx. £80m shortfall in custody assets, which were held by WealthTek without the necessary regulatory permissions. Very likely a fraud and money laundering operation under the hood, and yet another example of the FCA asleep at the wheel and unresponsive to whistleblowers. Though I can't find the pensioner story alluded to by the OP.

dunstonh

masonic said:

Keep_pedalling said:

Was this Woodford?

My guess is WealthTek. Failed last year. Approx. £80m shortfall in custody assets, which were held by WealthTek without the necessary regulatory permissions. Very likely a fraud and money laundering operation under the hood, and yet another example of the FCA asleep at the wheel and unresponsive to whistleblowers. Though I can't find the pensioner story alluded to by the OP.

It was in the Telegraph
https://www.telegraph.co.uk/money/pensions/private-pensions/lost-pension-to-fraud-administrators-taking-compensation/

79% of investors will get full compensation.  300 savers [sic] will be up to £23k worse off.