Understanding FSCS for ISAs/SIPP & funds

Rich99

Hi, I've got a stocks and shares ISA and a SIPP with AJBell. Each account has shares in a few different tracker funds (e.g. BlackRock consensus 85). I'm trying to work out what level of protection I get from FSCS. I.e. if AJBell go bust do I get £85k protection across everything? Or is it £85k protection in each fund? Or does it not matter because even if AJBell go bust I'd still own the shares? Or is it more then £85k protection because AJBell state that money is spread across multiple banks?

Similarly, if (e.g.) BlackRock go bust, presumably I'd get £85k protection in total for my BlackRock holdings across both the ISA and the SIPP?

Thanks for any explanations, I'm just trying to work out how I'm best splitting things up to ensure I get maximum protection, and it's very confusing!

masonic

If AJ Bell go bust, then you can claim up to £85k for any losses you suffer from your assets in relation to that, including amounts deducted to cover administrator fees, missing assets or any other sum of money they were obliged to pay you at the time they failed. The only time money spread between banks makes any difference is when those banks fail.

If Blackrock went bust, then it would be the same story but in relation to investments they claimed to hold in their funds but did not. In this scenario, the compensation may well be meaningless, because if Blackrock failed likely so would the monetary system.

Rich99

Thanks - so from what you're saying, if AJBell went bust, I wouldn't need compensation for most of my holdings because I'd still have them?

I guess my underlying question is whether, once I hit £85k invested in total across the ISA/SIPP it's worth opening a ISA/SIPP with another company in order to protect more of my money in a worst case scenario, or if it doesn't actually matter?

masonic

Rich99 said:

Thanks - so from what you're saying, if AJBell went bust, I wouldn't need compensation for most of my holdings because I'd still have them?

That is correct. It would be very unlikely that anything would be missing, especially as the fund you have chosen is a very popular one. Anything that was missing would be shared between all investors in proportion to their investment size so that the per investor loss would be a small percentage.

The main cost you would face would be a share of the administrator's fees, and that has tended to be capped well below the FSCS limit.

Rich99 said:

I guess my underlying question is whether, once I hit £85k invested in total across the ISA/SIPP it's worth opening a ISA/SIPP with another company in order to protect more of my money in a worst case scenario, or if it doesn't actually matter?

It doesn't really matter in relation risk of losing money. It may matter in relation to accessing capital, as a failure could freeze your assets for a number of months.

Rich99

Ok, that's really helpful. Thanks!