£85k FSCS cap - Risk to reward appetite!

Darnhall123

I am currently in year 3 of a 5 year fix rate ISA deal with Shawbrook Bank where I’ve been depositing my full £20k allowance each year. 

I secured the 5.22% deal available at the time (in 2023/2024) which I can take advantage of each new ISA year for the fixed term period. 

So my question is simply about the £85k FSCS limit that I will pass next year (2026/2027), if I continue to deposit the full £20k allowance and if I do same in 2027/2028 it’ll take me well over £100k with compounding interest accrued. 

Obviously I could put my £40k elsewhere over the next couple of years, but as product interest rates continue to fall, the return will probably be nowhere near as attractive as I can get with 5.22%. 

Do many here take the risk of holding more than the £85k FSCS limit because, “it'll probably be ok”,  or is this a stupid risk to consider (especially as Shawbrook aren’t one of the “bigger names”). 

wmb194

Darnhall123 said:

I am currently in year 3 of a 5 year fix rate ISA deal with Shawbrook Bank where I’ve been depositing my full £20k allowance each year. 

I secured the 5.22% deal available at the time (in 2023/2024) which I can take advantage of each new ISA year for the fixed term period. 

So my question is simply about the £85k FSCS limit that I will pass next year (2026/2027), if I continue to deposit the full £20k allowance and if I do same in 2027/2028 it’ll take me well over £100k with compounding interest accrued. 

Obviously I could put my £40k elsewhere over the next couple of years, but as product interest rates continue to fall, the return will probably be nowhere near as attractive as I can get with 5.22%. 

Do many here take the risk of holding more than the £85k FSCS limit because, “it'll probably be ok”,  or is it a stupid risk to consider especially as Shawbrook aren’t one of the “bigger names”. 

With HSBC, Lloyds, Barclays, Nationwide and the like I wouldn’t worry but with the smaller players I’d think about the risk versus reward. Is a c.1% rate uplift worth it relative to potentially losing £40k+?

masonic

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Darnhall123

wmb194 said:

Darnhall123 said:

I am currently in year 3 of a 5 year fix rate ISA deal with Shawbrook Bank where I’ve been depositing my full £20k allowance each year. 

I secured the 5.22% deal available at the time (in 2023/2024) which I can take advantage of each new ISA year for the fixed term period. 

So my question is simply about the £85k FSCS limit that I will pass next year (2026/2027), if I continue to deposit the full £20k allowance and if I do same in 2027/2028 it’ll take me well over £100k with compounding interest accrued. 

Obviously I could put my £40k elsewhere over the next couple of years, but as product interest rates continue to fall, the return will probably be nowhere near as attractive as I can get with 5.22%. 

Do many here take the risk of holding more than the £85k FSCS limit because, “it'll probably be ok”,  or is it a stupid risk to consider especially as Shawbrook aren’t one of the “bigger names”. 

With HSBC, Lloyds, Barclays, Nationwide and the like I wouldn’t worry but with the smaller players I’d think about the risk versus reward. Is a c.1% rate uplift worth it relative to potentially losing £40k+?

Thanks for the helpful reply. 

Thing is it [probably] will be ok, but I also understand that it could be a very expensive mistake if they fell into financial trouble. 

I think I just need a few replies to see what others would do in my position and what they have done themselves with smaller banks. 

Darnhall123

masonic said:

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Great advice and certainly worth consideration. I currently only hold cash ISAs and have never properly dabbled with S&S because a) I like the certainty of a guaranteed return and b) I have zero knowledge of S&S trading. 
I think the way to go will be to put part of next years allowance in Shawbrook keeping me under the £85k threshold and put the rest in S&S. If it proves fruitful (as most say it will Vs cash ISAs), I may put future allowances in S&S too. 

saajan_12

Remember you can split your contributions, so I'd put in 10k year 4 as a no brainer to still stay within the 85k limit even after 5 years interest. 

Beyond that its a simple maths question on the remaining 10k in year 4 and 20k in year 5. Say elsewhere you get 3.22%, ie a 2% difference. That's £800 interest difference (2% x 10k year 1, 2% x 30k year 2) Vs a risk on the 30k plus interest, so 31k. 

So £800 / £31k = 2.6%. Do you think there's a higher than 2.6% chance Shawbrook go bankrupt in two years? Also would losing the 31k radically change your life (in which case no amount of return helps)? 

Personally I tend to not sweat going a small amount over and would just shift when the excess becomes large enough. But that is a very personal decision based on your risk appetite. 

The other question is if you're looking over a longer timeframe eg 5 years then why not invest some / all of it rather than sticking to cash interest? 

Darnhall123

saajan_12 said:

Remember you can split your contributions, so I'd put in 10k year 4 as a no brainer to still stay within the 85k limit even after 5 years interest. 

Beyond that its a simple maths question on the remaining 10k in year 4 and 20k in year 5. Say elsewhere you get 3.22%, ie a 2% difference. That's £800 interest difference (2% x 10k year 1, 2% x 30k year 2) Vs a risk on the 30k plus interest, so 31k. 

So £800 / £31k = 2.6%. Do you think there's a higher than 2.6% chance Shawbrook go bankrupt in two years? Also would losing the 31k radically change your life (in which case no amount of return helps)? 

Personally I tend to not sweat going a small amount over and would just shift when the excess becomes large enough. But that is a very personal decision based on your risk appetite. 

The other question is if you're looking over a longer timeframe eg 5 years then why not invest some / all of it rather than sticking to cash interest? 

What a great, informative, thought inducing reply!

Thank you 🫡👏

Ch1ll1Phlakes

Darnhall123 said:

masonic said:

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Great advice and certainly worth consideration. I currently only hold cash ISAs and have never properly dabbled with S&S because a) I like the certainty of a guaranteed return and b) I have zero knowledge of S&S trading. 
I think the way to go will be to put part of next years allowance in Shawbrook keeping me under the £85k threshold and put the rest in S&S. If it proves fruitful (as most say it will Vs cash ISAs), I may put future allowances in S&S too. 

You mention you've never used a S&S ISA before as "I like the certainty of a guaranteed return". With this in mind I don't imagine the risk of losing £30k+ is going to sit that well with yourself even if you know the risk of losing that money is generally small. For your own piece of mind you will probably be more comfortable depositing the funds elsewhere. 

On your suggested solution to use a stocks & shares ISA in the future, take time to read up on what you can invest in and how fees and such work. As again, while this involves risk understanding those risks and how a S&S ISA works will give you greater piece of mind, while in the long term, hopefully, greater returns than even the Cash ISA you have currently. If you want help with ideas, the forum is a great place to ask for suggestions and many will provide links to articles and websites on the basics of investing and products.

For example, here are some resources I have picked up from the forum over the past few months as someone who is relatively new to a S&S ISA.
Lars Kroijer
Passive investing Archives - Monevator

Darnhall123

Ch1ll1Phlakes said:

Darnhall123 said:

masonic said:

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Great advice and certainly worth consideration. I currently only hold cash ISAs and have never properly dabbled with S&S because a) I like the certainty of a guaranteed return and b) I have zero knowledge of S&S trading. 
I think the way to go will be to put part of next years allowance in Shawbrook keeping me under the £85k threshold and put the rest in S&S. If it proves fruitful (as most say it will Vs cash ISAs), I may put future allowances in S&S too. 

You mention you've never used a S&S ISA before as "I like the certainty of a guaranteed return". With this in mind I don't imagine the risk of losing £30k+ is going to sit that well with yourself even if you know the risk of losing that money is generally small. For your own piece of mind you will probably be more comfortable depositing the funds elsewhere. 

On your suggested solution to use a stocks & shares ISA in the future, take time to read up on what you can invest in and how fees and such work. As again, while this involves risk understanding those risks and how a S&S ISA works will give you greater piece of mind, while in the long term, hopefully, greater returns than even the Cash ISA you have currently. If you want help with ideas, the forum is a great place to ask for suggestions and many will provide links to articles and websites on the basics of investing and products.

For example, here are some resources I have picked up from the forum over the past few months as someone who is relatively new to a S&S ISA.
Lars Kroijer
Passive investing Archives - Monevator

Thank you so much. Another great reply. 

Although I say I’ve never ‘dabbled’ in S&S, that’s not strictly true. I do have a very small amount invested with AJ Bell Dodl, (about £6k in a GIA), but my lack knowledge is laughable…. Literally finger in the air and hope for the best.  I thought I’d test the water with a few random managed funds, or a few hundred quid here and there with a company I’ve heard of…. (and tbf, so far I haven’t lost anything). 

But to take the next step and start ‘investing’ £tens of thousands in S&S ISA is daunting for me because I’m so ‘green’ and risk averse. 

So thank you for the links above. I certainly will check both out.  

Albermarle

Darnhall123 said:

masonic said:

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Great advice and certainly worth consideration. I currently only hold cash ISAs and have never properly dabbled with S&S because a) I like the certainty of a guaranteed return and b) I have zero knowledge of S&S trading. 
I think the way to go will be to put part of next years allowance in Shawbrook keeping me under the £85k threshold and put the rest in S&S. If it proves fruitful (as most say it will Vs cash ISAs), I may put future allowances in S&S too. 

Probably a good start to clarify some definitions.

To most people, trading in investments means a lot of very short term buying and selling, usually of individual stocks. It is very risky and can be very time consuming if done properly. 

This is not what is being suggested to you when posters say it could be a good idea to invest some of the money in a S&S ISA. Normally it is advised to invest via funds that hold many many different shares from all over the world, and maybe some bonds. Often these will just follow general developments in financial markets, and not be affected by one or other company having problems. Then leave the investment alone for many years. 
It is often called Buy & Hold investing.
You can do the same with certain types of pension and get some tax breaks as well.
What is your pension situation ?

Darnhall123

Albermarle said:

Darnhall123 said:

masonic said:

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Great advice and certainly worth consideration. I currently only hold cash ISAs and have never properly dabbled with S&S because a) I like the certainty of a guaranteed return and b) I have zero knowledge of S&S trading. 
I think the way to go will be to put part of next years allowance in Shawbrook keeping me under the £85k threshold and put the rest in S&S. If it proves fruitful (as most say it will Vs cash ISAs), I may put future allowances in S&S too. 

Probably a good start to clarify some definitions.

To most people, trading in investments means a lot of very short term buying and selling, usually of individual stocks. It is very risky and can be very time consuming if done properly. 

This is not what is being suggested to you when posters say it could be a good idea to invest some of the money in a S&S ISA. Normally it is advised to invest via funds that hold many many different shares from all over the world, and maybe some bonds. Often these will just follow general developments in financial markets, and not be affected by one or other company having problems. Then leave the investment alone for many years. 
It is often called Buy & Hold investing.
You can do the same with certain types of pension and get some tax breaks as well.
What is your pension situation ?

Albermarle said:

Darnhall123 said:

masonic said:

You're looking at a difference of about 0.8%, so putting >£15-35k at risk (however small that risk may be) for £125-£300 extra interest per year. It's up to you whether you are comfortable with that level of risk, and are happy with that level of reward for the risk you'd be taking.

If you are comfortable with that sort of risk, perhaps you should consider the use of a S&S ISA for some of the money.

Great advice and certainly worth consideration. I currently only hold cash ISAs and have never properly dabbled with S&S because a) I like the certainty of a guaranteed return and b) I have zero knowledge of S&S trading. 
I think the way to go will be to put part of next years allowance in Shawbrook keeping me under the £85k threshold and put the rest in S&S. If it proves fruitful (as most say it will Vs cash ISAs), I may put future allowances in S&S too. 

Probably a good start to clarify some definitions.

To most people, trading in investments means a lot of very short term buying and selling, usually of individual stocks. It is very risky and can be very time consuming if done properly. 

This is not what is being suggested to you when posters say it could be a good idea to invest some of the money in a S&S ISA. Normally it is advised to invest via funds that hold many many different shares from all over the world, and maybe some bonds. Often these will just follow general developments in financial markets, and not be affected by one or other company having problems. Then leave the investment alone for many years. 
It is often called Buy & Hold investing.
You can do the same with certain types of pension and get some tax breaks as well.
What is your pension situation ?

Pension isn’t fantastic if I’m being honest and I understand that the most sensible thing would be to pile as much as I can in, while I’m still working. 

I’m 62 and plan / hope to retire in 3 years when I’m 65, take out 25% to see me through the 2 years till I get state pension. 

My pot currently stands around £300k, but I do like having savings (currently around £125k in ISAs). I also have about £20k in other savings. 

I’m putting around £1700 a month into my pension now that I’m mortgage free.