Stocks and shares ISA 85k protection

Matt_22

Can I ask how the 85k protection works for stocks and shares ISAs. I have about 85k in the HSBC world index fund and am thinking of adding more. Should I be worried as am going up the 85k protection limit. If I am thinking correctly here. Thanks

masonic

The assets of the fund are ring-fenced from the companies involved in managing them, so the compensation is for losses due to fraud etc, and the cost of returning assets to investors if a company (fund house or investment platform) goes bust. If something like that were to happen, your loss is likely to be a small fraction of your total holding.

So keeping below the FSCS limit is much less important for investments, providing you stick with major providers.

tacpot12

So basically there is no protection from the FSCS for a Stocks and Shares ISA unless you were given bad advice what to invest in. 

It is the nature of stocks and shares to rise and fall in value, so the FSCS offers no protection against this (including the value of a stock or share falls to zero).

The FCA mandates other protections that protect consumers from losing their money if the investment provider or the ISA manager goes bust. Both the investment provider and the ISA manager have to ring-fence client money and assets held on the client's behalf so that they never becomes part of the firm's money so cannot be lost or used to pay what the firm owns.

masonic

tacpot12 said:

So basically there is no protection from the FSCS for a Stocks and Shares ISA unless you were given bad advice what to invest in.

Not true. FSCS covers investments when the provider enters administration. Look up the cases of Beaufort Securities and SVS XO. Investment managers have an obligation to return assets to investors, so if they cannot do that, the FSCS steps in to compensate those investors based on the value of those investments at the relevant bar date following the failure of the firm.

Eyeful

1. FSCS SAVINGS PROTECTION CHECKER:
https://www.fscs.org.uk/check/check-your-money-is-protected/
If your UK-authorised bank, building society or credit union fails and can’t pay back your money,
FSCS can automatically pay you compensation. This protection  is up to £85K.

2. FSCS Investment Protection checker.
https://www.fscs.org.uk/check/investment-protection-checker/
If your financial advisor goes out of business, or the firm that provided your investment product fails,
the FSCS may be able to step in and pay compensation. But our protection varies depending on the type of product, and some investment products aren't protected at all. Also, there are limits to the amount we can compensate too.

The above are quotes from the FSCS website.

3. You are talking about an investment product the, HSBC World Index Fund. 
The FSCS does not apply to such investment products

4. Think about it:
Investing means putting your money at risk,  you hope to get more out than you put in. (no guarantees),
It is basically long term gambolling.
Short term the odds of you winning, small.
Long term (say at least 10 years) odds of you winning is high.
 

Eyeful

I think that the OP would be wise to:-
1. Learn to spot red flags that scammers wave when trying to attract their victims to their scams.
2.Take care in their choice of stockbroker/ investment platform.
3. Understand that the FSCS protection for Savings & Investments are very different
4. Assume any investment product he buys, is not going to be covered with any FSCS protection.
So do research before buying it not after.

masonic

Eyeful said:

3. You are talking about an investment product the, HSBC World Index Fund. 
The FSCS does not apply to such investment products

The statement quoted above is false.

The HSBC World Index Fund is a UK OEIC managed by HSBC Asset Management (Fund Services UK) Limited. There is FSCS protection for OEICs. If the fund house, in this case HSBC Asset Management (Fund Services UK) Limited, goes bust, then the investor has a claim for the value of the underlying assets held within the OEIC according to the number of fund units they held. If the administrators cannot arrange for the OEIC to be transferred to a new management company, then they will liquidate the fund and use the proceeds to repay investors. Any shortfall due to missing assets (assets the fund claimed to hold, but actually did not) and administration fees will be eligible for FSCS compensation. (this is not true of other types of collective investment product, such as Investment Trusts and ETFs because there you are investing in shares of a exchange traded corporate entity rather than units in a portfolio)

If instead, the OP is holding this on a platform, such as Fidelity's, and Fidelity goes bust, then the investor has a claim for the value of the fund units they own on the platform. If there is a shortfall in the number of fund units actually held by Fidelity, then the investor will have a claim for any shortfall in units valued at a bar date set by the high court during the administration process and will be eligible for FSCS compensation for this loss and their share of the administration costs. (this is also true of shares in ETFs, Investment Trusts, and individual company shares for which there was a shortfall)

Or have I just passed into a parallel universe where none of this is true any longer?

Eyeful said:

I think that the OP would be wise to:-
1. Learn to spot red flags that scammers wave when trying to attract their victims to their scams.
2.Take care in their choice of stockbroker/ investment platform.
3. Understand that the FSCS protection for Savings & Investments are very different
4. Assume any investment product he buys, is not going to be covered with any FSCS protection.
So do research before buying it not after.

In fairness, I don't think the OP has given any indication that they do not understand any of this, contrary to some of the replies they have received. The obvious exception being 4, which is a very bizarre position to take.

Eyeful

Or have I just passed into a parallel universe where none of this is true any longer?

In fairness, I don't think the OP has given any indication that they do not understand any of this, contrary to some of the replies they have received. The obvious exception being 4, which is a very bizarre position to take.

1. You are correct as usual & you have not just passed into a parallel universe.
 Thank you for correcting my slip up.

2. I do not think point 4 is a .bizarre position to take.
I see nothing wrong or bizarre in suggesting doing research before buying a product, not after.
The FSCS INVESTMENT PROTECTION is more complicated than the FSCS savings protection.
By assuming that any investment product I buy will not be covered by the FSCS Investment protection, it makes me extra careful when choosing investment products.
Perhaps its to do with my engineering background. Safety first and all that.

masonic

Thanks, to be clear I wasn't referring to the bit about doing research ahead of buying as bizarre, just about assuming FSCS protection will not apply. When you assume this, it would be tempting to consider protected investments on a par with unprotected investments. The latter tend to be more advanced, less regulated products, for example P2P loans, mini-bonds, and cryptocurrency. They are exempt from such protection for good reason.

The fact that administrations can be lengthy and leave you unable to access your assets for long periods of time should be enough incentive to avoid firms that are in any way vulnerable. I believe the OP uses iWeb as custodian, so between HSDL and HSBC there is little to be concerned about on that front.

Matt_22

I have recently moved to Iweb yes. I have some with iweb some with ajbell

Eyeful

masonic said:

Thanks, to be clear I wasn't referring to the bit about doing research ahead of buying as bizarre, just about assuming FSCS protection will not apply. When you assume this, it would be tempting to consider protected investments on a par with unprotected investments. The latter tend to be more advanced, less regulated products, for example P2P loans, mini-bonds, and cryptocurrency. They are exempt from such protection for good reason.

The fact that administrations can be lengthy and leave you unable to access your assets for long periods of time should be enough incentive to avoid firms that are in any way vulnerable. I believe the OP uses iWeb as custodian, so between HSDL and HSBC there is little to be concerned about on that front.

I agree entirely.