When savings - including ISAs - hit £85,000....

WindfallWendy

I feel sure this is a stupid question, but presumably if and when my ISA hits £85k, I should open an ISA account with a different bank to avoid falling foul of what is protected... Right?

And therefore any interest going into an £85k ISA needs to be transferred out for safekeeping.... Right?

It just occured to me that if my S&S ISA (currently £63k) has a good year, then I probably don't want to assume I'll be putting another £20k in it next April. So I need to be ready to open an account with someone else next spring. 

Sorry for daft question, but for some reason I think my brain has equated "tax free" to "exempt from any risk".... Which must be wrong. Right?

eskbanker

The significance of FSCS protection differs for savings and investments, despite sharing the same value, so yes, if your savings approach £85K (including accrued interest) then, unless saving with NS&I, it's prudent to put some elsewhere.

However, the situation isn't the same for S&S ISAs (or unwrapped investment accounts for that matter) where the money is used to invest in products with third parties, so if the platform fails then the money is still ring-fenced.

badger09

WindfallWendy said:

I feel sure this is a stupid question, but presumably if and when my ISA hits £85k, I should open an ISA account with a different bank to avoid falling foul of what is protected... Right?

And therefore any interest going into an £85k ISA needs to be transferred out for safekeeping.... Right?

It just occured to me that if my S&S ISA (currently £63k) has a good year, then I probably don't want to assume I'll be putting another £20k in it next April. So I need to be ready to open an account with someone else next spring. 

Sorry for daft question, but for some reason I think my brain has equated "tax free" to "exempt from any risk".... Which must be wrong. Right?

As long as you stick to mainstream investments on established reputable platforms, there is no need to worry about £85k limit as your investments are ring fenced. So if a platform does get into trouble, your investments are safe but you might experience a delay in accessing them.  

As far as cash is concerned, better to stay below about £80k per institution/banking group, to allow for interest to be added. 

Albermarle

Many people have funds well above £85K in S&S ISAs, as the risk is seen as minimal, as long as said above you stick with mainstream regulated investments on well established platforms.
Probably if I was with a new platform, that has minimal/no charges and losing money , I would be a bit more cautious.

Mr.Generous

Unless your funds are with a very small finance company they will not be allowed to go bust, a govt buy out at worst. The UK would not allow any major institution to go bust. Who was the last bank or building society that went under - and don't name one that was taken over by another, or govt buy out, because in those circumstances all monies were safe?

MetaPhysical

If you have money in a MM fund as part of your pension (or ISA) is that MM fund subject to the £85k protection limit?

masonic

MetaPhysical said:

If you have money in a MM fund as part of your pension (or ISA) is that MM fund subject to the £85k protection limit?

It depends on the fund and what you are looking to be protected against. There is no protection against the MM fund falling in value. There may be no protection against the fund provider going bust if it is an ETF or offshore fund. There will generally be protection if the ISA or pension provider goes bust after stealing some of your assets.

ranciduk

A proposed change to banking rules will increase significantly the amount of savers' money that is protected when a bank or building society goes under.

The planned increase takes into account inflation since the limit was last set in 2017, the body which supervises UK banks, the Prudential Regulation Authority (PRA) said.

If a financial institution fails, the deposit protection scheme means customers can currently claim back the first £85,000 of their savings. That would rise to £110,000 under the new proposal

WindfallWendy

Crikey - thanks everyone for all these views. I'm glad I asked the not-quite-so-silly question now!!!

MM = money market?

I hadn't worked through the fact S&S ISA is actually based on shares rather than cash. What a wally 🤷

I'm with Vanguard but I might still set up an ISA with a different S&S just to spread different types of risk. I assume different providers have different portfolios, so it seems vaguely sensible ....??

Yorkie1

I have 2 cash ISAs around the £65K value each. For this year's ISA I will open it with a 3rd institution for safety.

Shylock_249

IMO it's a pity that NS&I don't allow transfer in ISAs only deposits within the current year.